Interesting review by Prof. Vincenç Navarro at his blog[es] on how the real problem of the Eurozone is not really the rather normal finances of peripheral countries but in the lack of demand of the central countries, notably Germany.
Germany, supposedly the economic engine of the EU, has been pretty low in the last decade, with small GDP growth figures and high unemployment. What is worse: the domestic demand of Germany has been lower than the peripheral countries now being punished for precisely sustaining the economy of the Eurozone (and specially of Germany itself) with their demand.
This is because Germany, still with a social-democrat government then, chose not to use the huge surplus that conversion to the euro generated to increase its domestic economy by rising salaries (and hence demand) but to speculate in the peripheral countries feeding the housing bubble and the deficit escalation.
Germany is in fact the wealthy but savy cousin who wants to sell commodities to their less well off relatives. And oddly enough, it has worked for a while, thanks to German (and French) credit. But logically this was untenable in the long run and now the Germans (and the French) want their money back by any means, what implies the destruction of the demand for German products.
As I said before, Mr. Volkswagen: how do you expect us to buy your cars if we work for misery salaries and pensions?
Navarro mentions that Oskar Lafontaine, then minister of economy and now co-leader of the growing communist Die Linke party, left Schröeder's government and the SDP for that reason. Lafontaine proposed instead a more balanced approach, increasing the income of German workers and hence the internal demand, what would have created a much more balanced EU and not this neocolonial engender designed for Mr. Volkswagen exporting until the demand runs dry (what is happening right now).
So what really needs to be fixed is that historical error that highly imbalanced the demand in the Eurozone. The demand by Germany and other Eurozone countries need to rise, what probably means increasing local salaries.
That does not mean that other barbarities like the Spanish housing bubble do not need to be addressed, they do. In fact Spaniards could work for less or demand more commodities if housing prices were not so extremely high, and that's a good reason to explode this bubble. But that would cause serious trouble to banks, who have invested heavily in this worthless excercise of financial engineering.
That's after all the real problem we have in EU: if we do what is logical (explode bubbles, restore a healthy demand by rising income), then banks would sink. Nobody cares about that except banks themselves, because they can always be replaced by other more serious banks, private or public. Of course some private investors would suffer but most people would be unscathed.
But the interest of the people does not matter to policy-makers, specially as EU is anything but a democracy, so Brussels and the Eurozone oligarchs have decided that it's best to make people pay for the errors of the banks and re-level the Eurozone demand to misery levels by lowering income and making sure that the banks are paid back.
This is extremely short-sighted: it's bread for today and hunger for tomorrow. Even for the bankers. If there is only a very low demand in the Eurozone, then Mr. Volksvagen (my imaginary archetype of European capitalists) won't be able to sell nearly anything and the economy will become stagnant for a very very long time.
The problem is clear: who dares to hang the bell from the cat's (banks') neck? It's much needed if we want to avoid Europe from sinking into misery and self-destruction.
Nobody? Then I think I know where the first socialist revolution of the 21st century will happen.