The Eurozone debt crisis that was supposed to have blown over long ago instead has become more like an endless game of Whac-a-Mole, with both new and old problems popping up faster than European leaders can bop them.
As Europe's finance ministers gathered in Dublin today (Friday), they faced at least half a dozen major issues threatening the fiscal health of the Eurozone.
Although Europe's leaders, in concert with the International Monetary Fund (IMF), have succeeded in keeping a lid on each successive crisis over the past three years, that streak can't survive in the face of the new and old fiscal woes that have been peppering the Eurozone.
U.S. investors can't let those past successes deceive them into thinking the Eurozone is no longer a worry.
When the Eurozone debt crisis finally implodes – and sooner or later, it has to – it will hammer stock markets around the globe.
The Latest Eurozone Debt Crisis Whac-a-Moles
At the top of the list of problems facing the Eurozone is Cyprus. That one's far from over.
On Thursday, the Cypriot government confirmed that the cost of its bailout had risen from about $23 billion to $30 billion, and that it might have to sell most of its gold reserves to pay for its portion of the bailout.
And it will most assuredly get worse. The decimation of the Cypriot financial industry in the wake of its debt crisis will shave 12.5% to 15% from the tiny nation's economy over the next couple of years.
You can bet an impoverished Cyprus will need to beg the EU and IMF for table scraps often in the years ahead.
A court in Portugal, one of the original debt-plagued PIIGS (Portugal, Ireland, Italy, Greece and Spain), tossed out austerity measures that had been a required part of that country's $101 billion bailout in 2011.
Ironically, the EU finance ministers agreed in principle on Friday to give both Portugal and Ireland more time to pay back their bailout loans.
And earlier in the week, a report by the bailout coordinating troika (the European Commission, the IMF and the European Central Bank) said Portugal's lingering fiscal struggles eventually could force it to seek a second bailout.
A report released Tuesday by the Organization for Economic Co-operation and Development (OECD) said that Slovenia is facing a "severe banking crisis."
Another report by the European Commission said both Slovenia and Spain had "excessive" budget imbalances that could force them to pay fines of 0.1% of their economic output, in accordance with tough new EU budget surveillance rules.
Italy's political crisis remains unresolved as well, which will further delay needed labor market reforms. Meanwhile, Italy's debt-to-GDP ratio is expected to rise past last year's all-time high of 127% to 130.4% this year.
Finally, the EC report called out France – Europe's second-largest economy – saying that the economic reforms enacted so far would "not be sufficient to solve competitiveness issues."
The report added: "France's public-sector indebtedness represents a vulnerability, not only for the country itself, but also for the euro area as a whole."
Lack of Growth Guarantees Eurozone Debt Crisis Meltdown
The only thing that could prevent the Eurozone debt crisis from at some point imploding is economic growth, and that's not happening.
According to Eurostat, the GDP for the 17-nation Eurozone plunged 0.6% in the final quarter of 2012, a steeper drop than the 0.4% economists had expected and the worst decline since 2009, and the third consecutive decline.
The average unemployment rate across the Eurozone is at a staggering 12%, the highest since the creation of the economic bloc in 1995. The problem is far more acute in some countries; Spain, for instance, has an unemployment rate of 26.3%, and in Greece it's 26.4%.
And recent economic data indicates things are getting worse. Industrial production in Spain plunged 8.5% in February from a year earlier; in Italy it was down 3.8%.
While a healthy EU could prop up one or two struggling members, instead a handful of healthy countries are trying to prop up many struggling neighbors.
There's almost no chance the European debt crisis will be resolved without a major meltdown – it's just a question of when.
Money Morning Global Investing Strategist Martin Hutchinson said he expects the Eurozone economy to "stagnate," and suggested investors keep a watchful eye on it.
"For us as investors, the whole region is best avoided," Hutchinson said.
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