Only if EU leaders make the European Central Bank the lender of last resort, implement a fiscal stimulus, and make sure the ECB cuts rates to zero and the euro avoid a meltdown and probable break-up, Nouriel Roubini writes in an op-ed published in the FT this morning.

His article expands upon a series of tweets yesterday and reiterates his conviction that the European rescue fund—the European Financial Stability Facility—and the special purpose vehicle intended to leverage it are merely "turkeys" that "will not fly."

The original EFSF was already a giant collateralised debt obligation, where a bunch of dodgy, sub-triple-A sovereigns try to achieve, by miracle, a triple-A rating via bilateral guarantees. So a leveraged EFSF is a giant CDO squared that will not work and will not reduce spreads to sustainable levels.

He emphasizes that only sizable deflation will restore growth to the periphery, which is why Italy's days are numbered:

Even a restructuring of the debt – that will cause significant damage and losses to creditors in Italy and abroad – will not restore growth and competitiveness...if you cannot devalue, or grow, or deflate to a real depreciation, the only option left will end up being to give up on the euro and to go back to the lira and other national currencies.

Thus, while the euro could handle a Greek, Portuguese, or Irish default, Spain and Italy are too big to fail and too big to save. Neither country is currently insolvent, but illiquidity will all too likely result in insolvency.

Read his full column here.