Austerity might not work for Spain and Italy

Unlike Greece, Portugal and Ireland — the patients previously forced into the austerity cure — Italy and Spain have already made their own substantial strides toward cutting their deficits.

Some economists warn that forcing further cuts could push their teetering economies over the edge. And unlike Greece or Portugal, they are so big that any default might shatter the euro union for good.

“Italy has done everything asked of it — it has cut left, right and center,” said Yanis Varoufakis, an economist in Athens who has written widely on the euro zone’s travails. “But if you keep cutting like this you start to cut into muscle, which affects your growth and your tax revenues.”…

Italy’s overall debt level of 126 percent of G.D.P. is one of the highest in the world. And its failure to emerge from a decade-long slump suggests it will be harder than ever for Rome to service that debt.