We consider the stability of clouds surrounded by a hotter confining m
edium with respect to which they are in motion, against Kelvin-Helmhol
tz instabilities (KHIs). In the presence of cooling, sound waves are d
amped by dissipation. Whenever cooling times are shorter than sound cr
ossing times, as they are in the normal interstellar medium, this impl
ies that the instability generated at the interface of the two media c
annot propagate far from the interface itself. To study how this influ
ences the overall stability, first we derive an analytic dispersion re
lation for cooling media, separated by a shear layer. The inclusion of
dissipation does not heal the instability, but it is shown that only
a small volume around the interface is affected, the perturbation deca
ying exponentially with distance from the surface; this is confirmed b
y numerical simulations. Numerical simulations of spherical clouds mov
ing in a surrounding intercloud medium by which they are pressure con
fined show that these clouds develop a core/halo structure, with a tur
bulent halo, and a core in laminar flow nearly unscathed by the KHIs.
The related and previously reported ''champagne effect,'' whereby clou
ds seem to explode from their top sides, is cured by the inclusion of
radiative losses.