Quote Originally Posted by Kralizec View Post
Prior to the introduction of the Euro some of those countries (Italy and Greece in any case) were paying extremely high interest rates on their bonds as well. The low interest rates they paid during the good years were because A- investers assumed that those economies would always maintain decent growth so that they'd always be able to refinance their debt (good thing we have rating agencies!) and B-the ECB would always keep inflation low, so the risk of debt devaluation is minimal.
Under the same circumstances but with national currencies those countries would probably have resorted to devaluation, which would also have caused the rates on their bonds to spike.

Or put in other words: even without the euro those same countries would still be in deep ****. That investers buy few Spanish or Italian bonds is an indictment against those country's financial practices and not some mark of (dis)approval of the eurozone as such.
Without the euro, those countries would not have borrowed as heavily since they would be stuck with the higher interest rates. I imagine they would have just stagnated rather than go through the bubble/collapse cycle. The problem with the Euro was the same as the problem in the US - banks lent people/governments cheap money they couldn't realistically be expected to pay back (rating agencies ftw!). The Euro prevents localized corrective action by the federal bank.