The Economist argues that Ireland, Greece and Portugal are in an impossible position:

At the EU’s insistence, the peripherals’ priority is to slash their budget deficits regardless of the consequences on growth. But as austerity drags down output, their enormous debts—expected to peak at 160% of GDP for Greece, 125% for Ireland and 100% for Portugal—look ever more unpayable, so bond yields stay high. The result is a downward spiral.
As if that were not enough, the European Central Bank in Frankfurt seems set on raising interest rates on April 7th, which will strengthen the euro and further undermine the peripherals’ efforts to become more competitive. Some politicians are still pushing daft demands, such as forcing Ireland to raise its corporate tax rate, which would block its best route to growth. Most pernicious, though, is the perverse logic of the euro zone’s rescue mechanisms. Europe’s leaders won’t hear of debt reduction now, but insist that any country requiring help from 2013 may then need to have its debt restructured and that new official lending will take priority over bondholders. The risk that investors could face a haircut in two years’ time keeps yields high today, which in turn blights the rescue plans.
This newspaper has argued that Greece, Ireland and Portugal need their debt burdens cut sooner rather than later. That case is stronger than ever, not only because today’s approach is failing but because the risks of restructuring are falling.

All true, except, perhaps, the last half of the last sentence.

And that’s the problem.