The bond vigilantes may have woken up first in Greece, Ireland, and Portugal. "But France," Roubini says, "does not look much better than the periphery."

In Roubini's view, the probability of the right steps being taken in France soon is not great. "Politically they are constrained from making reforms." For example, after the French made relatively small changes in their social welfare system—raising the retirement age from 60 to 62 —"You had massive riots in the streets."

And that, in Roubini's view, was just the beginning of the necessary austerity.

"What's going to happen when you do more radical reform? That's an open question in the case of France."

Looking beyond France to the future trajectory of the crisis, Roubini says, "The next one in line is going to be Portugal. "Due to the severity of Portuguese debt problems, Portugal is going to lose market access—and that means they are going to require IMF support as well.

But the real nightmare domino is Spain. Roubini refers to the Spanish debt problems as "the elephant in the room".

"You can try to ring fence Spain. And you can essentially try to provide financing officially to Ireland, Portugal, and Greece for three years. Leave them out of the market. Maybe restructure their debt down the line."

"But if Spain falls off the cliff, there is not enough official money in this envelope of European resources to bail out Spain. Spain is too big to fail on one side—and also too big to be bailed out."

With Spain, the first problem is the size of its public debt: €1 trillion. (Greece, by contrast, has €300 of public debt.) Spain also has €1 trillion in private foreign liabilities.

And for problems of that magnitude, there simply are not enough resources—governmental or super-sovereign—to go around.

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