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The rest of the world may be looking forward to a great new year unfolding, but the Eurozone may be dreading the coming of 2012 in which it will face some of its toughest challenges. At the height of its economic struggles, the specter of a new recession is also top of their list of worries. The past may have seen record bailouts for some members of the European Union, specifically Greece, Ireland, and Portugal, but these economies are tiny in comparison to Italy and Spain. The events of 2012 will no doubt be historic, with some being key to the final resolution of the European Union debt crisis.

Easily Foreseeable Hurdles

The chain of events about to be unleashed in the Eurozone can range from the easily foreseeable to a major train wreck, should things not go as planned. To start, the following should happen:

• Affordable Borrowing – Italy and Spain will first try to balance the books by seeing affordable borrowing and good interest rates, as early as the second week in January. They will seek to do this early to avoid the potential of a worsening economy making it more difficult to borrow.

• Recession – The slowdown in the European economies is already affecting the member countries. It will mean bigger government deficits, more unemployment, and lower tax revenues. This will make it more difficult to resolve the crisis if the recession comes on fast and furious.

• Iron out Debt Plan – Greece may have been bailed out, but the terms of the debt plan still need to be ironed out. Austerity measures are already in place, but the final write-down may equate to almost 50 percent.

Potential for More Crises

Should these events be mild and cause no fear in the markets, then the Eurozone can probably breathe a little sigh of relief. However, should fears of an Italian or Spanish default be stirred up, the markets will respond with higher interest rates and a clamp-down on lending. Already being in debt, it will be near impossible to resolve the crisis if Spain or Italy cannot get affordable borrowing. The odds of a default will increase and this news can have a major impact on the European Union, of which Italy and Spain are both members. Even the European Central Bank is balking at bailing out such large economies, and so it is hoped a different solution can be reached before these countries get too close to the edge of a cliff. The worst scenario would include record unemployment, higher taxes, more austerity measures throughout the Eurozone, and freezes in government programs, wages, and pensions. This could cause rioting and protests within the nations as voters may not see the reason to support any more draconian measures, especially if the Eurozone experiences another recession. The best solution to the troubles the Eurozone faces in 2012 is to stay calm and try to lay the framework for a recovery that keeps all seventeen member nations from facing a very bad 2012 and beyond.