The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( TheStreet) -- Governments may soon fall in France and Holland, and are quickly losing legitimacy elsewhere in Europe, because austerity programs and a common currency risk throwing the continent into an endless recession. Europe's infamous labor laws, which make layoffs expensive and businesses reluctant to invest, have long impeded investment and productivity growth. During the expansion of the 2000s, the competitive core -- Germany, other northern economies and important parts of France -- coped better and accomplished stronger productivity. Consequently, the euro became undervalued for those economies and overvalued for Mediterranean economies -- specifically, goods made in the north became bargain priced and those made in Club Med states too expensive. 10 Stocks That Won't Leave You High and Dry >> Southern economies suffered large trade deficits with the north and insufficient demand for what they make. Governments in Italy, Greece and Portugal borrowed feverishly to keep folks employed, finance early retirements, and provide inexpensive health care.
Excessive government spending did not undo all the troubled economies of Europe. Spain, the next government likely to need a bailout, ran persistent budget surpluses until the financial crisis. However, it enjoyed real estate and property booms, as wealthier northern Europeans sought vacations and second homes in its sunny climate. Ireland and Iceland, the first European countries to collapse, were undermined by banks that helped finance Europe's wider real estate bubble by selling bonds and taking deposits from foreigners.