Greek debt woes have hit the euro and raised fears that the single currency could crack, but in some ways it is the economic problems of Italy and Spain that should be grabbing more attention from investors, argues Mike Dicks, chief economist atBarclays Wealth.

Data from the Organisation for Economic Co-operation and Development suggest that they have way bigger competitiveness problems than does Greece, he said, pointing out that since 1995, Spain's real unit labour costs (RULCs) have risen by nearly 30 per cent, while Italy’s labour costs have surged by around 75 per cent.

“Putting the data another way, back in 1995, Italian manufacturers benefitted from having labour costs per unit of output that were only 60 per cent of Germany's. Now that competitive advantage has given way to a massive disadvantage, of around 30 per cent. So, their RULCs relative to Germany's have deteriorated by about 120 per cent over the period," Dicks said.

“Another way of demonstrating the problems that Italy faces is to compare its public debt to its exports, instead of to its GDP. On that basis, its debt-to-'income' ratio is roughly 4,” he said.

He said this ratio of four is near what is the “tipping point” identified by economists as when a financial crisis typically breaks out.

Dicks noted that recent news that the Greeks have made substantial fiscal tightening efforts will raise the chances that investors will look more favourably on Greece. However, he cautioned that some of this renewed optimism may be unjustified as the Greek economy will suffer as the budgetary reins tighten.