The sting has been taken out of the euro-zone debt crisis by huge amounts of unconventional policy support by the European Central Bank but a debate is still raging about what euro-zone governments are doing with the time afforded them by ECB President Mario Draghi's "whatever it takes" support of the euro.

Take Italy, Mario Draghi's own country, which has recently formed a grand coalition following inconclusive elections earlier this year. With a debt-to-GDP ratio of well over 100 percent, Italy is widely regarded as a euro-zone member that needs to push through aggressive structural reforms in order to regain its competitiveness within the euro zone and beyond.

"Thanks to the kinds of policies we have followed in the last few years, we have already gained some room for maneuver within the 3-percent target," Italy's new finance minister, Fabrizio Saccomanni, said in an interview with CNBC on Saturday on the sidelines of a meeting of G7 finance ministers and central bankers in Aylesbury, England.

Three percent of GDP is the target for euro-zone members to achieve on the size of their annual deficits. The European Commission has already allowed some members to slow the pace of reaching this target to help boost growth, though not everyone agrees that Italy has time on its side to address its debt levels.

Speaking in Italy over the weekend, veteran hedge fund manager George Soros warned Italy that the current calm won't last.

And:

Soros has long called for the introduction of eurobonds and great fiscal union, something Berlin has long opposed.

"The evidence is growing that austerity policies do not work. Sooner or later, I expect the tendency to turn. The sooner it happens, the better," Soros said.

Anyone hoping for Italy's new government to take significant action on structural, long-term reforms should take note of the Italian governments view of its own policy agenda.

"We don't have a very long-term agenda. The result of the election has produced a fragmented parliament. There is a strong coalition that supports the government, but also the possibility that we will have new elections in a year and a half or two years," Saccomanni said.

"We are trying to operate within that time frame. Not just the five-year year normal length of the legislature."

David Fuller's view ECB President Mario Draghi has been very effective in lowering bond rates in troubled EU countries and this has bought the region additional time to address its lack of GDP growth.

However, realists have long pointed out that Europe needed to introduce a degree of fiscal union and issue Eurobonds, if the Eurozone and its single currency were to survive. Germany has long been opposed to this because it obviously did not want to agree to any closer ties in terms of fiscal policy until a meaningful degree of fiscal discipline had been achieved by the Southern European countries.

Nevertheless, Europe's policy of relying primarily on austerity measures, plus low interest rates with the help of the ECB to bring fiscal policies more in line, is running out of time given the protracted recessions and unemployment which has risen to politically destabilising levels.

Significantly, this has now been publicly acknowledged by German Finance Minister, Wolfgang Schäuble, judging from his comments at a UK investment conference last Thursday:


A failure to tackle high youth unemployment could destroy democratic support for the European Union's governments, the German finance minister, Wolfgang Schäuble, said Thursday, in an apparent concession that the euro zone's focus on austerity must be tempered by other policies.

Speaking at an investment conference in London, Mr. Schäuble cited joblessness among young people as Europe's biggest problem, arguing that the Continent faced the difficult task of ''enhancing growth but in a sustainable way.''

''We will have to speed up in fighting youth unemployment, because otherwise we will lose the support, in a democratic way, in some populations of the European Union,'' he said.

Mr. Schäuble, seen as one of the hawks among European finance ministers, said he supported recent moves by the European Commission, the bloc's executive, to give some countries more time to bring down their budget deficits. But he also emphasized the need for more structural reform in Europe.

Across the Continent there are growing signs of austerity fatigue among voters amid worries that a focus on retrenchment is pushing economies into a downward spiral. Last month, José Manuel Barroso, the president of the European Commission, said austerity had hit the limits of public acceptance.

Europe's long-running economic problems are far from resolved, but at least it is slowly moving in the right direction.