With so much attention focused on whether the U.S. will experience a double-dip recession and/or deflation, it's easy to forget that there is another specter hanging over world stock markets. That specter could well come back to haunt investors this week, according to Mohamed El-Erian, the voluble co-chief investment officer of bond giant PIMCO.

This concerns U.S. investors, too
Investors who believe this does not affect the U.S. stock market do so at their peril. It was just a few months ago, at the end of April, that the European sovereign debt crisis put a firm end to the monster stock rally that began in March 2009. During the two-month May-June stretch, the market fell over 12%.

Writing on the Financial Times website yesterday, El-Erian warned that: "The failure to reduce risk spreads means that the [European] public sector bailout is not working. ... This situation cannot be sustained forever ... and it raises the risk of renewed contagion." [Emphasis added.]

Irish woes could signal another flare-up in Europe
Today, the spread between the yield on Irish government bonds and safe German government bonds rose to nearly 4% -- its highest level since joining the euro in 1999. The Irish Central Bank governor is calling for increased fiscal austerity, but the Irish have already been tightening the belt hard. Shareholders of Irish lender AIB (NYSE: AIB) should expect a rocky ride over the coming days and weeks.

In fact, investors should expect these developments to put pressure on the wider European banking sector, particularly those of periphery countries, including Banco Santander (NYSE: STD), Banco Bilbao (NYSE: BBVA), and National Bank of Greece (NYSE: NBG) (Despite the risks, fellow Fool Tim Hanson likes the latter -- he picked it as an 11 O'Clock Stock.)

These European banks are solid
Relatively insulated from the eurozone's troubles are Swiss banks UBS (NYSE: UBS) and Credit Suisse (NYSE: CS), but mind the price you pay: Both institutions trade at a substantial premium to other large-cap European banks.

Another area that investors can look for safety at better prices is Nordic banks, including Danske Bank (OTC: DNSKY.PK), Swedbank (OTC: SWDBY.PK), and Skandinaviska Enskilda Banken (OTC: SVKEF.PK), all of which are well-capitalized. Furthermore, neither Sweden nor Denmark are part of the euro, and both countries have a healthy balance sheet.

Forget "old world" industrialized countries, developing economies will provide most of the growth this decade. Beware, however; as Tim Hanson explains, there is a wrong way to invest in emerging markets.

Fool contributor Alex Dumortier has no beneficial interest in any of the stocks mentioned in this article. The Fool owns shares of National Bank of Greece SA. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.