Well...it's Europe. As a member of the Euro, Spain has vastly less control over their monetary policy than any truly sovereign state on the face of the planet. Conversely, as a member of the EU, they also have vastly less support from a central government than any province or state would have. They also face an incredibly sclerotic bureaucracy and a non-functional political process, dominated by groups and factions which (to put it mildly) do not have their best interests at heart.
To a first approximation, there is nowhere else on Earth where this debt crisis would be simultaneously so serious and so hard to deal with. You can't treat this like you were dealing with the US, or China, South-East Asia. This is Europe and that means that, barring a miracle, we're all[1] probably screwed.
[1]: Well, anyone who relies on the global economy for income, goods, or services, anyhow. Which would be, uh, all of us on HN, at a minimum...
In my opinion Spain needs to hit the big reset button, Argentina style. There are a lot of very interested parties in finance that don't want to see that happen, but it'd serve the Spanish well. Digging out (which appears harder by the day) otherwise will take decades, and has no greater chance for succeeding. Pull the band-aid off quickly and get on with rebuilding and putting people back to work.
Yes, It'd be painful for a time, but they'd recovery much faster. But of course, there's the scare of that becoming the fall of the Euro. And also, the other countries are not very happy to receive a lot of Spaniards. And with Spain letting the Euro go there'd be a lot of immigrants (unless of course, they let the Schengen Agreement fall too).
