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It has been quite a while since we’ve heard about the debt problems of Europe. With the European Central Bank’s (ECB) highly successful Italian and Spanish bond auctions and the European equities market recuperating some of its losses last week, it seems that debt contagion fears are now a thing of the past.

Still, I can’t help but remain doubtful on the future prospects of Europe. While I am not a pessimist, I am a realist. Everything may seem fine and dandy now, but moving forward, how will Europe deal with the extremely tight austerity measures against the backdrop of very weak economic growth?

If you look at the economic situation of the euro zone’s largest economies, you’ll find even more doubts and questions than answers!

For one, unemployment in Spain is still ridonculously high at 21%, which is more than double the European average. Its labor market is so troubled that Spanish policymakers have even proposed to close their borders to Romanian immigrants, as over a third of Spain’s 860,000 Romanian residents are jobless.

France, Europe’s second largest economy, has got problems of its own to deal with, as evidenced by the lack of growth in Q2 2011. The French economy came very close to contracting last quarter as extremely weak consumer spending held GDP to a 0.0% increase.

Not to be one of those “gloom and doom” analysts or anything, but I think that such a weak figure seriously puts to question whether French President Nicolas Sarkozy’s target of 2 percent growth for 2011 is still a realistic goal, and whether France can really reduce its budget deficit to 5.7% of output by the end of the year.

Then there’s the issue of shaky industrial production. Germany, the giant of all giants that’s widely considered the euro zone’s last line of defense against a double-dip recession, posted a 0.8% decline in production in June. Likewise, Italy, the region’s third largest moneymaker, posted a 0.6% drop of its own.

If these economic giants can’t even bear the weight of their own troubles, then how can we expect them to lead the way for a European recovery? Better yet, what hope does Europe have if its largest economies can’t get their acts together?

Given the tight austerity measures, lagging growth in the major European nations, and risk aversion still lingering in the markets, I don’t see the euro being able to rise above the 1.4500 area.

Even if the euro does manage to go that high, I can’t imagine it holding above for very long! For the euro bears out there, keep the sell trigger near, as you may need to pull it very soon…

EUR/USD Daily Chart