One of the major problems comes from converting the debt into the new/old currencies that replace the Euro. We don't know how each country will preform after the Euro is removed. Too much guess work. You have to guess how to value the new/old currency, and you'd have to transfer the old debt (in euros) into that new/old currency. Then the markets will start to readjust said value. It would be disastrous if they readjusted even lower - the amount of work (simplifying here) required to pay off that freshly transferred debt would be even more tedious. Then people will have even less confidence in that currency. Then we start snowballing all over again...
The Euro responds to ONE economy (the amalgamated countries which adopted the Euro). So unless
all these economies are performing at the
same level and reaching the
same targets, the currency becomes a misrepresentation of the performance of the country. This imbalance snowballs into problems. When they entered the Euro, each country agreed to maintain/exceed certain targets. Slowly but surely, the European commission started to let countries slide on some of these targets. Not just the ones asking for bailouts - Germany and France did this too.
They are stuck between a rock and a hard place. I've always liked the idea of having two separate "euro" currencies; a more expensive one, for countries like Holland, Germany... and a cheaper one, for countries like Greece, Portugal, Italy & Ireland. But it's still not a solution.
Unfortunately, economics is a tad bit unpredictable. No one has perfected the mathematics of the economy. We're still learning
.
