New political leadership in Italy will result in much-needed mid- to long-term structural reforms. But it won’t be enough to resolve the troubled country’s short-term debt problem, and Italy will be one of several countries to exit the eurozone. That’s according to a forecast by Megan Greene, director of European economics at Roubini Global Economics. She predicts a domino effect kicking in as early as 2013 or 2014.

“I think Greece will take the step first. Once Greece goes, I think Portugal will be just months behind,” said Greene in a phone interview with me from London, England on Friday. “Italy and Spain will eventually follow as well. If Italy and Spain leave the eurozone, then the eurozone hardly exists anymore.”

This will of course impact the global banking system. “It would be like a Lehman-times-five event,” said Greene. “It would cause a massive credit crunch.”

While it’s not entirely surprising that Dr. Doom’s European economics specialist has a bearish view, Greene makes a pretty good case. Five key points:

• Forget about too big to fail. Italy is too big to bail out. The country is €1.9 trillion in debt. The European Financial Stability Facility has €440 billion available. Greene told me Italy would burn through that in about 18 months. The International Monetary Fund only has another €291 billion available. Theoretically, the European Central Bank (ECB) could step in as a lender of last resort, and buy Italian bonds. “That’s what lots of people are hoping for now,” said Greene. “I think it’s really unlikely.” It’s illegal, for starters. ECB’s mandate would have to be revised and that’s virtually impossible given the lack of European political support for such a major shift.

• Italian bond holders are in for a haircut. The first cut will probably be about 25%, but subsequent announcements will go further. Debt financing is not the only problem facing Italy though. The country will limp through this round, but will face a much more difficult time meeting its debt obligations in 2014.

• Italy’s real problem is its inability to compete economically. The economy simply isn’t strong enough. Greene said Italians have two choices. They can implement an austerity program that includes wage cuts, which will produce a decade-long recession or worse. Or they can exit the eurozone and abandon the euro currency. “It would be messy, ugly and painful,” said Greene. “But they would regain competitiveness almost overnight. The new currency would depreciate significantly and they would return to growth much faster.” She’s betting on door number 2.

• Euro politicians are in a no-win situation. “These politicians are hoping to get re-elected,” said Greene. “They’re stuck between trying to do something at the European Union level and trying to keep their electorates onboard.” In fact, many have failed to do so. The region’s politics have entered a period in which genuine leadership requires, to some extent at least, ignoring voters.

• Keep your eye on 2013/2014. If Greene is right about the breakdown of the eurozone, things could get really ugly. “The U.S. of course is facing its own double-dip recession. China has a worrying property bubble that we think will probably burst,” she said. “If you have Italy and Spain leaving the eurozone at around the same time, it sort of creates a perfect storm.”

Greene blogs at Euro area debt crisis.