Eurozone: not just a temporary debt problem

If France can get the eurozone and the IMF to divvy up to bail out its banks ("France is in the EU to take money out, not put it in"), will the eurozone problem go away? Is it just about France's banks? No.

Southern Europe won't be able to repay its debts, and the debt markets know it. Irwin Stelzer is pessimistic. We know by now Greece will never meet any target it signs up to. Greeks don't believe in paying their taxes, and Greece doesn't believe in paying its debts. Greece needs to have its own permanently devaluing currency. Will it get there before beggaring its economy? Will its corrupt democracy survive? Leaving the euro will be messy and expensive, but it's inevitable, so the sooner the better - unless as a Greek politician you think you can persuade frightened governments to lend you even more of their taxpayers' money which you know you won't repay.

Spain will not meet its deficit-reduction target, which Stelzer thinks is more likely to come in at 9% of GDP than the promised 6%. This is higher than recent predictions, which have been around the 6.6% mark. Stelzer's argument:

It has abandoned plans to sell its lottery and postponed plans to sell or lease its Madrid and Barcelona airports. The government says the market is putting too low a value on the lottery, and potential investors in the airports need time to get their financing in order. And it seems that the central government can't rein in the spending of regional governments, making it impossible to keep overall spending under control.

Nor will Portugal meet its target.

Tax receipts are lower than had been forecast only a short while ago, and a firmly entrenched mayor on the island of Madeira has pledged to continue his spendthrift ways, preventing Portugal from meeting its spending-reduction goals.

Besides, as in Spain, the government is about to be turfed out of office by the electorate, and sees no reason to antagonize voters even more with unpopular cuts and privatizations.

Italy's politicians, of course, have no will to do anything at all.

So these countries too face gradual or not so gradual ruin while they stay in the euro. They need their own weak currencies. And Spanish, Portuguese and Italian voters will ask: if Greece doesn't have to pay its debts, why should we struggle to pay ours?

The eurozone will fragment. Just let's not pay to bail out other countries' banks first.