What makes this crisis self-sustaining is the presence of two interacting components: a combined private and public sector solvency crisis, and a competitiveness crisis. To address a lack of competitiveness, southern Europe, including Italy, would need outright deflation. In some cases wages and prices would need to drop by 30 per cent to fall in line with northern eurozone levels. Yet deflation would increase the real value of debt. It may just be conceivable that the periphery will get on top of their competitiveness problem, or on top of the debt problem, but surely not on top of both at the same time, without devaluation or default (confere ponto 1). (...) The longer this dual crisis drags on, the more radical, and improbable, any solutions would have to be. In my view, the crisis is insoluble without a Europeanisation of the banking sector (confere ponto 2), common labour and product market rules that prevent inflation stickiness in southern Europe (confere ponto 5), and a minimal fiscal union with a single European bond (confere ponto 3). This is not a complete list (confere ponto 4).
Wolfgang Münchau, No happy new year for the eurozone, FT.