Yes, it will. And the sooner the better.

The Governments have a responsibility to pay back as much as they possibly can. Too much is at stake if they don't. Of course, they'll continually shirk off this responsibility and keep inflating the debt away/bailing each other out, until the money is worth nothing, and even the economic engines of the world are crippled under the mountain of debt.

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It is not the goal of a country to have zero debts. Countries NEED to make debts to make investments. Debts are the engine of the countries' economies.  What essentially happened in Greece, Italy and other EU countries is that the debts went over the country GDP (over 100% of that) and THAT is what should never happen. I can't comment much further on it, though, because I don't have knowlegde on that matter. I'm sure there are other users who have done way more research than me on that matter.

The problem with Greece and others is not the amount of debt, it's the leverage on the debt. That is, there's too much debt in relation to savings, and the debt was made in too riskier areas. This happened due to too much Government intervention in the economy (setting interest rates, running deficits, engaging in market-controlling policies).

I'm talking about private debt, here. Public debt (or, government debt) is just cancerous to the economy, and there is no moral reason for it. Much of Europe's (and the USA's... and Japan's) problems have come from too much public debt, and from converting private debt into public debt (through the various bailout programs).

Italy is in the pooper that's for sure, looking unstable..

Really it does seem like Europe is destined for quite a long time of recovery, the question is whether its morally acceptable to pull the rug out from everyone all at once. Loss of livelihoods and potentially quite significant social unrest must be gauged against how actions should be undertaken

Yes you are right that we need debt in a fiat currency system.  If we had sound money none of this would be an issue, every country is in debt because they have to pay interest on ever piece of printed money.  Someone please explain to me why we need to be paying interest to a private central bank just for printing money?  How can you have financial stability when you are forced to borrow more each time to pay back the interest because the money doen't exist to pay it back?  How is it good to let a private central bank have control over the amount of money printed as well as interest rates?  Are people not worried that private central banks like the fed secretly printed 8 trillion dollars and gave them to the banks in the US in 2008?

either way the economic structure is fucked up, and needs some type of reform.

 This. Speculation is killing countries, economies, salaries, cutting jobs and creating more speculation.