The bond market vigilantes are back.

But this time they are roaming mostly through Europe rather than the United States &S212; at least for now &S212; seeking to impose fiscal rectitude on governments politically unable or unwilling to take the painful steps necessary to close gaping budget deficits.

You remember the bond vigilantes, don&S217;t you? As big investors in the credit markets, they developed a fearsome reputation in the early 1990s by collectively putting pressure on a newly elected U.S. president, Bill Clinton, to abandon his campaign promise of tax cuts. Instead, Mr. Clinton followed the advice of Robert Rubin, who joined the Clinton administration from his post at the top of Goldman Sachs and who made the case that a policy of budgetary restraint would keep interest rates on U.S. government bonds relatively low.

Now, the bond market posse is on the hunt again, turning its attention most acutely on Britain and Greece, where left-leaning governments are struggling to demonstrate that they have a workable plan to reduce deficits that are the highest in Europe &S212; about 13 percent of gross domestic product.

In Greece, the spreads between Greek 10-year bonds and their benchmark German counterparts soared to highs of 250 basis points last week as concerns grew over Greece&S217;s ability to service its enormous debt.

In Britain, bond investors greeted a prebudget Labour Party report that skimped on details of spending cuts with a sell-off that pushed gilt yields to their highest level since the depths of the financial crisis.

In Ireland, by contrast, the government presented the most severe budget in the country&S217;s history, largely to prove to wary bond investors that it was serious about cutting its own deficit.

And it is not just Europe that is feeling the heat. In Dubai, the bondholders of Dubai World&S217;s foundering real estate company, Nakheel, have adopted a highly confrontational approach as they have contemplated forcing Dubai World into default to lay claim to its assets.

&S220;There is a greater market focus now on who the fiscally vulnerable countries are,&S221; said Michael Saunders, the head of European economics at Citigroup.

In particular, Mr. Saunders sees the Labour government in Britain &S212; which is facing an uphill election battle &S212; as being more concerned with pleasing voters than investors, a stance that he says could lead to a bond market rout if gilt holders, a large proportion of them foreign, come to the conclusion that cutting the deficit is not a top priority.

The power of the bond trader once elicited the pointed remark from James Carville, Mr. Clinton&S217;s witty political strategist, that he wished to be reincarnated as a bond trader because, &S220;you can intimidate everybody.&S221;

For most of the past decade, though, the vigilantes have been in abeyance, since public-sector deficits were not an investor concern.

With the onset of the credit crisis last year, they surfed the global liquidity wave, buying up government debt all over the world in the view that, just as most big banks were too big to fail, so were sovereign economies, no matter how crushing their fiscal picture pay day advance.

But Dubai World&S217;s decision to delay payment on its debt has been a slap in the face of complacent bondholders. The immediate result has been a demand on their part for higher interest rates in the most vulnerable countries, adding to the potential borrowing costs of countries like Britain, Greece, Ireland and Spain that have benefited from lower rates because of the dearth of private borrowers in the global downturn.

The United States and Japan also face unusually high debt levels, spurred by huge stimulus programs. For the time being, investors are still willing to lend to them at generous rates. But bondholders are running out of patience with the most vulnerable countries.

In the euro zone, the European Central Bank&S217;s interest in keeping inflation low means that it is likely to maintain a stable euro, leaving the peripheral economies with no opportunity for a cheaper currency to help generate growth from exports.

As a result, governments in Portugal, Ireland, Greece and Spain have had to turn to increasingly dubious bond markets to raise funds while waiting for their economies to recover through the far more painful process of squeezing wages and shedding jobs to restore competitiveness.

A report from Standard Chartered said as much last Friday, forecasting bailouts, if not actual ejections, from the euro zone for Greece and Ireland once investors decide to pull the plug and stop refinancing the countries&S217; debts.

&S220;The idea that currency unions can&S217;t break up is rubbish,&S221; said Tim Congdon, an economist and admitted Euroskeptic who has advised Conservative governments in Britain. &S220;The critical issue is whether governments can repay their debts in new currencies or euros once they leave.&S221;

If they can pay back bond investors in new and cheaper currencies, then it is in the interests of countries like Greece to go out on their own, Mr. Congdon said.

But with other countries seeking the shelter of the euro and leaders like Angela Merkel of Germany hinting that the big powers would come to the rescue of Greece and other distressed countries if necessary, most economists argue that the euro zone is unlikely to crack.

Still, that hasn&S217;t stopped bond investors from talking up a new divergence trade in Europe &S212; the flip side to the convergence trade earlier this decade, during which Irish, Greek and Spanish government bonds were bought on the theory that a grand economic harmony would sweep Europe.

In Britain, what was once unthinkable is now being discussed: a possible downgrade of the country&S217;s triple-A rating. Moody&S217;s recently affirmed the rating, citing the ease with which the Treasury had been able to raise funds, but some analysts are convinced that a downgrade is inevitable.

&S220;There is a clear drop in confidence on the part of bond investors,&S221; said Mark Schofield, a fixed-income strategist at Citigroup in London. &S220;I think it is all beginning to unravel.&S221;

Bond Vigilantes Prowling Europe