New year , new crisis . No sooner had Europe ’ s bond traders , politicians and central bankers gotten back to their desks than it was time to begin tussling over the fate of a small economy on the periphery of Europe . This time around , it ’ s Portugal . And yet the script seems very similar to the one played out already in Greece and Ireland . Bond yields surge . The government denies furiously there is any need for a bailout . French and German leaders rehash some of their lines about the importance of European solidarity . And the guys at the International Monetary Fund and the European Union pack their bags and check flight schedules . Before you know it , the defiant words have vanished , and the bailout has begun . And yet so far , most of the discussion has been about when Portugal gets rescued . There has been very little talk about a far more important question ― whether it should be . In reality , it ’ s a terrible idea . It won ’ t stop the euro crisis spreading to the next country ; the rescue mechanism is a mess ; there ’ s no plan for getting countries out of the clutches of the EU and the IMF ; and the obvious flaws in the packages are making the breakup of the euro area more likely . It would be better to admit that the EU made a huge mistake in bailing out Greece , and simply restructure Portuguese debt . No one can say how long the Portuguese government will hold out against pressure from the bond market . Yields soared at the start of last week . They have fallen slightly since then . Yesterday , 10 - year Portuguese debt was yielding 6 . 6 percent . As a rule of thumb , 7 percent seems to be the tipping point . Maybe they can keep bond yields below that crucial level , but you wouldn ’ t bet your last bottle of port on it . The real issue is whether it makes sense to assemble yet another rescue package , the third for a euro member in less than a year . The answer is no . Here ’ s why . First , it won ’ t stop the contagion . Bailing out Greece didn ’ t stop the markets moving on to Ireland . Bailing out Ireland didn ’ t stop Portugal being attacked next . There ’ s no reason to think a Portuguese rescue will stop the markets moving on to Spain . The markets attack one country at a time because that is the easiest way to make some quick profits ― not because it is the only country at risk . As soon as one bailout is finished , the whole show just moves on to the next one . Second , the rescue mechanism is a mess . The interest rate charged to countries is punitive , making it harder for them to dig their way out of their financial hole . Ireland is paying 5 . 51 percent interest on the first tranche of money it received from the bailout package . The Greek government is paying about 5 percent on the money it is getting from the rest of Europe . That ’ s a lot more than the funds usually cost the lenders . The reason countries need rescuing is because they can ’ t afford to pay the interest on all the money they have borrowed . How can it make sense to charge them premium rates for yet more debt ? Third , there ’ s no plan for getting countries out of the rescue mechanism . Greek and Irish bond yields are still way above the euro - area averages , even after the bailouts . There is no sign of yields coming down . Nor is there any sign of their economies recovering . So how are they meant to get back to normal growth again ? You shouldn ’ t start a war without an exit strategy . Likewise , you shouldn ’ t rescue a country without any idea how to get the markets back to functioning properly . Finally , all the flaws in the rescue mechanism make a breakup of the euro more likely . Investors aren ’ t stupid . They can see quite clearly that the EU and IMF medicine isn ’ t working . Only last week , Fitch Ratings downgraded Greek debt to junk . Greece ’ s economy shrank 4 percent in 2010 , and will probably contract 3 percent this year , according to Fitch . The rest of the world is recovering , but Greece is stuck in what could be a 10 - or 20 - year recession . How is the country supposed to bring its debts under control when it gets poorer every year ? If that is what a “ rescue ” amounts to , it is hardly surprising investors keep betting against the euro . It is already clear the EU made a mistake in bailing out Greece . It would have been better to simply let it default . As the old maxim has it : When you are in a hole , the first thing to do is stop digging . It would be better to let Portugal default , if necessary , then deal with the consequences of that . The last thing the euro area needs is another failed rescue package that only ends up making the whole crisis even worse . By Matthew Lynn Matthew Lynn is a Bloomberg News columnist and the author of “ Bust , ” a book on the Greek debt crisis . The opinions expressed are his own . ― Ed . ( Bloomberg )