Paul Krugman, nailing it…
What has happened, it turns out, is that by going on the euro, Spain and Italy in effect reduced themselves to the status of third-world countries that have to borrow in someone else’s currency, with all the loss of flexibility that implies.
And of course, this explains why the US (and Japan, and the UK) could never be anything like the Eurozone countries, since all these countries borrow in their own currencies.
Initially these types of fiscal straightjackets work well. The infamous Argentine Currency Board — which attempted to peg the peso to the dollar — did contain inflation (before bursting into a ball of flames at the end).
And it’s well known that in the early days of the Eurozone, borrowing costs for Italy, Greece, et. al plunges, allowing all kinds of extravagances. Just like in Argentina: ending in tears.