Why Eurozone can't take care of its seemingly never-ending crisis?

Euro-zone has fallen back into recession and, contrary to comments that are daily bombarding us, most trends are pointing towards further deterioration. So it seems that “the worst of crisis is over”, already several times repeated in the past, be a joke. In Germany and France, industrial production peaked in early 2011. Other countries (Greece, Spain, Portugal) never really recovered. Retail sales are stagnating in Germany, and shrinking dramatically in countries that had to be bailed out. The Netherlands are again a surprise, with similar development as in Hungary. About banking, while deposits are bleeding with annual rates of 10% in Spain and Portugal, almost all over Eurozone rising non-performing loans and increased capital requirements force banks to reduce their lending, often choking small and medium-sized companies (again Spain and Portugal are front-running). In particular this is reflected in declining loans trend by financial institutions in the PIIGS (except Italy, for now). Why Eurozone can't take care of its seemingly never-ending crisis? Take, as example, Italian situation. If something can be argued looking at real GDP it is that, over the past 12 years, Italy's growth has been lower than Japan’s one and without grow, otherwise (borderline) sustainable debt levels become too much of a burden on the economy. This imply that GDP is a poor economic strength indicator if ignores debt accumulated by governments, the largest contributors to GDP. Furthermore, among PIIGS collapsing industrial production and retail sales are eroding the tax base while unemployment, and especially youth unemployment, provides for potentially explosive social tensions and/or radical political movements success, making governing more difficult. Moreover, as the average interest paid on government debt is surprisingly uniform (3-4%) among Euro-partners, the subsidy of being member in the Euro zone does not enforce fiscal discipline. Indeed, even in times of rapidly declining revenue, governments in such a mess are unwilling or unable to cut spending unless forced to do so by EU/ECB/IMF. This is the reason why most countries try to resist any bailouts until it is too late (usually as soon as capital markets refuse to further finance its debt). So, as fiscal adjustments are too large and recessionary, trends take their toll on government finances and debt-to-GDP ratios continue to rise. Finally, considering that governments do not have any cash reserves, insolvency is only a failed debt auction away and can happen at any time.

On the other side, PIIGS’s trade imbalances are on the mend (anyway without the major beneficiaries, Germany and Netherlands, giving up any of their surpluses) but, unfortunately, despite recent improvements, Germany has still a large advantage in unit labor costs and house prices in Spain and Portugal continue their declining trend, weighing on banks.

Now, one likely scenario outcome is that developments in Spain and Italy will lead to further deficits and increase in debt levels so that at some point, capital markets will refuse to absorb new debt and ECB/EU/IMF will be forced to step in, as local banking systems are loaded with government bonds. Unfortunately, any connected government bond restructuring - unavoidable in this situation as Greece and Spain confirm - would also impair the banking system and, possibly, rumors regarding the solvency of banking systems could trigger bank runs, as depositors are warned by the Cypriot example. Central banks, at this point, might certainly be able to avoid a collapse of the Eurozone by printing money as there were no tomorrow, but still won't be able to prevent stock markets from reacting negatively to recurring crises. At the end many years of further austerity seem to be the inevitable result, with potential political and social instability sprinkled in.