The Spanish puzzle
You sense that the battle over the future of the eurozone has shifted to Spain. It is where the key engagements are likely to be fought over the weeks ahead.
The country is caught in a vicious cycle. Watching it is like trying to unlock a puzzle or a cube. Every twist locks you further into the puzzle.
The country was encouraged to reduce its deficit. Even the US president found time to place a call to the reluctant Spanish prime minister, urging him to show some spine and
get cutting. Shortly after that , designed to reduce spending by 15bn euros (£13bn; $18bn) over the next two years. The plan is that by 2011 Spain's deficit should be down to 6% of GDP.
For a few days it brought some relief. Civil servants' wages are to be cut by 5%. Ministers have taken a 15% pay cut. State investment is to be slashed. The package still has some admirers. Only this weekend the head of the IMF, Dominque Strauss-Kahn, described the package as "strong and moving in the right direction".
Then investors looked again at the Spanish economy. It has an unemployment rate of 20%. That figure stretches above 40% for those in the 16-24 age bracket. Almost a quarter of the economy was dependent on the property sector. That has crashed, with real estate companies owing $300bn.
So how will the economy grow in order not just to get people back to work but to attract investors to finance national debt? It did not help that last week the Spanish government trimmed its own projections for growth. So last Friday, after the European markets had closed, the rating agency Fitch downgraded Spanish sovereign debt. Why? Because of the country's sluggish growth prospects.
In the midst of all this a question gnaws away at officials. Is the prescribed medicine - spending cuts - making the patient worse? Plenty of economists fear that Europe's age of austerity will stifle the fragile recovery and strangle growth. Others argue that reducing the public sector in the Baltic states freed up the private sector and the countries began growing again.
Now twist the puzzle again. The IMF and others say that one of the keys to getting Spain more dynamic and competitive is to reform its labour market. They want to make it easier to hire and fire. The cost of firing Spanish workers is among the highest in the OECD. So the Spanish government, the unions and business are discussing changes. They were supposed to have reached a deal this weekend. They didn't.
Although the unions represent less than 20% of the workforce they are threatening a general strike over the reforms. A day of protests against the austerity measures is already planned for 8 June. There are doubts whether the government can implement its plans. It has seen its standing in the polls decline and there are calls for an early election. There is just the first tremor of political instability.
There is yet another factor. Many of Spain's community banks - cajas - are in trouble. There is a restructuring plan under way, but that will need financing and, of course, as investors examine the Spanish puzzle they become less willing to put their money in. So the price of financing the country's debts increases.
To an extent Spain's problem is Europe's problem. For a decade many of the eurozone countries used the cover of the single currency to borrow and expand their welfare states. In fact they were living way beyond their means. Putting that right is not just a financial dilemma - it challenges what many Europeans see as their way of life.
The eurozone crisis has a way to run.
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