Debt hangs over recovery for EU strugglers

As the euro zone's weakest members crawl out of their longest recession in modern history, their prospects of recovery are weighed down by a crushing mountain of debt far heavier than before four years of financial crisis.

Italy, Greece, Ireland and Portugal all have public debt well in excess of annual economic output and risk a Japanese-style "lost decade" of grindingly low growth and high unemployment as they slowly repay their way out of trouble.

The average ratio of debt to gross domestic product in the 17-nation bloc stands at 95 per cent - lower than in the United States and far less than Japan, but dangerously high for ageing societies that cannot individually print money or devalue.

The official European Union line is that each bailed-out country must clean up its own mess and grow its way back to health without debt relief or mutualisation, except perhaps for Greece, which has long been declared a special case.

"As Margaret Thatcher used to say: TINA - There is no alternative," said Graham Bishop, an economic consultant.

Fiscal discipline and pro-market reforms to liberalise labour contracts, break trade union wage bargaining power, and curb welfare and pensions, were the only road to salvation, Bishop said.