SAN FRANCISCO (Marketwatch) -- Investors are dumping bonds in Ireland and Greece in a reprise of the sovereign debt crisis that shook global markets six months ago, as political infighting threatens to stymie budget reforms in the most debt-strapped countries.

But in a shift, the euro EURUSD, +0.19% has avoided the sharp dives that threatened to disband the European Monetary Union earlier this year, supported by perceptions the European Central Bank will move far more quickly to rein in loose monetary policy than other developed countries’ central banks, particularly the Federal Reserve. Read more of what’s expected from Fed.

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On Tuesday, Irish credit costs surged to a record high and bond prices tumbled, after the reported resignation of Jim McDaid, a member of parliament for Ireland’s Fianna Fail party, added to worries the government would fail to muster the votes for planned spending cuts and tax hikes totalling 15 billion euros ($21 billion.) Read more on McDaid’s resignation.

“Investors are worried about political factions coming into agreement about getting fiscal policy back on track,” said Andrew Wilkinson, senior market analyst for Interactive Brokers.

Credit-default spreads for Irish sovereign debt jumped 22 basis points to 5.20 percentage points, and hit 5.30 percentage points, a record high, said Markit. The gain means it costs about $520,000 a year to buy five years of default insurance for $10 million in Irish government debt.

The surge in Irish credit fears was echoed in higher costs to buy protection on debt of other so-called “PIIGS” countries. Greek CDS widened 15 basis points to 8.45 percentage points, while Portuguese CDS gained 8 basis points to 4.02 percentage points. One basis point is 1/100 of a percentage point. Read special report on May's European debt crisis.

Ireland’s 10-year bonds tumbled, sending yields up 19 basis points to 7.17% and further widening the gap with benchmark German bonds, which yielded 2.47%.

Yields on 10-year Greek government bonds surged 10 basis points to 10.67%. Selloffs in Greek and Portuguese debt were in full force last week when their governments’ own budget initiatives came into doubt. Read more on Greek, Portugal problems.

The euro, however, has held its ground, helped in part by strength in some of the larger European Union countries such as Germany and expectations that the Federal Reserve on Wednesday will roll out a new program to pump more liquidity into the U.S. economy, battering the U.S. dollar. Read more in currencies.

On Tuesday, the euro rose to $1.4029 from $1.3888 late Monday. It’s gained 3% since the start of October. Get more currency tools.

Worries about the peripheral countries “are being masked by the return to health by the core European countries,” Wilkinson said.