Lighting the blEU touchpaper?

If you strip away the political correctness, says Ambrose, an IMF report more or less condemns Southern Europe to death by slow suffocation.

We are, he says, seeing a pattern – first in Ireland, now in Greece and Portugal – where cuts are failing to close the deficit as fast as hoped. Trapped as it is with the fixed exchange rate of the euro, "Southern Europe will not recover for a long time".

What does this grim economic outlook mean for these countries?

The lesson of the 1930s is that politics can turn ugly as slumps drag into a third year, and voters lose faith in the promised recovery.

Portugal is about to have a general strike. Spain has already had one. The Portuguese government has lost its majority. In Spain unemployment will rise from the present level of 20%.

How are such troubles reflected in everyday life? The Wall Street Journal looks at Brunete, a "leafy town on the outskirts of Madrid, where residents live in comfortable homes behind high walls".

It is three years in arrears to providers of building supplies and electrical services. Soon, it says, it may be unable to pay city workers. Municipal leaders say that for years, they stepped in with their own funds rather than leaving constituents without services which they should have been getting from other parts of government.

Spain's 8,000 municipal governments owe companies some €13 billion. Big companies owed money say they can't continue to finance operations that employ more than 100,000 people collecting garbage, cleaning streets and maintaining parks. "We've been using our own capital to finance the cities," says one. "But our own sources of finance have dried up."

Some 125,000 companies (around 10% of Spain's total) have gone out of business since the economic downturn began in 2008. The second-leading cause of failure among Spain's small companies is late payments by public administrations. Indeed, earlier this year the government promised its cities a €3 billion credit line to help them pay suppliers, such as sanitation providers, that have threatened to cut services. But, says the paper, the funds haven't been delivered yet.

Some of the spending cuts made by the town are trivial, suggesting they've been avoiding gripping the problem. But tax receipts are falling and it's only going to get worse.

Political strains are showing even in the Netherlands, which is only now about to get its first operating government since February. Like many countries in Europe, says the WSJ, they have seen centrist parties losing support to those further to the right and left.

What then are the political prospects for a Southern Europe facing medium term economic decline? Italy seems content for the moment with its buffoonocracy, but Greece is simmering, and Spain and Portugal don't look set for stability.

Will these be the strains which pull apart the eurozone and perhaps even the EU?

Is the blEU touchpaper already lit?