The country most at risk of contagion is Italy, where anemic economic growth and faltering confidence in prime minister Mr Silvio Berlusconi are compounding the difficulty of servicing a debt to GDP ratio of nearly 120%.
Under pressure from his euro zone partners, Mr Berlusconi gave a raft of reform commitments at the summit, including raising the retirement age by two years, to 67 by 2026.
Not only do such deep seated policy shifts take years to have an economic impact, they are highly contentious politically. Postponing the retirement age is so fiercely opposed by Berlusconi's ally the Northern League that it could topple his coalition government, Royal Bank of Scotland said.
And, as with Greece, the euro zone is proposing that the European Commission, the European Union's executive arm, take a more active role in monitoring the implementation of Italy's reforms.
Italy's biggest trade union, CGIL, wasted no time in pledging to fight the reforms and urged smaller unions to unite against targeted attacks on Italian workers.
Its call to arms highlights the risk that the euro zone's northern creditors, led by Germany, are perceived as infringing the sovereignty of southern states by demanding untenable terms in return for their financial aid.
Political strains already apparent can only get worse in the absence of a strategy for breaking a vicious cycle of budget cuts sapping economic growth and forcing ever deeper austerity.
Gavekal, a Hong Kong research outfit, called the overnight deal uninspiring and ambiguous and said it would be impossible for the euro zone to produce a convincing fiscal and political solution for at least another year.
It added that "At some point down the line, however, we will either have prosperity caused by economic integration and reform or political revolutions caused by denial of democracy."
( Source: www.steelguru.com )