The impossible choice of struggling euro-zone countries

Struggling e uro-zone countries (Italy, possibly even France) are now faced with the choice between: Leaving the euro and devaluing their exchange rates, which would lead to major difficulties and possibly defaults among all economic agents (government, companies, banks) with external debt in euros; Staying in the euro and enduring: The inability to monetise fiscal deficits and therefore a sharp rise in interest rates when ever fiscal policy becomes more expansionary; The inability to correct a cost-competitiveness disadvantage other tha n by carrying out an internal devaluation, i.e. by reducing wages; Competition from countries that have carried out internal devaluations (like Spain). Leaving the euro would therefore be disastrous, but staying in the euro may also be disastrous.