This paper proposes a new mutual exciting regime-switching model where crises can spread contagiously across countries. Each country has its own hidden stochastic process that determines whether the country is in a normal or crisis regime. Contagion is defined as a rise in the transition probability to the crisis regime when other countries are in crisis in the past state. Using this new approach, I revisit the sovereign risk contagion in the euro area. I find that there are striking shifts in market pricing functions for the sovereign bond spreads. Multi-country contagion plays a dominant role in driving such shifts, while common risk factors and country-specific fundamentals are much less important.