Europe could descend into the political aggression of its past if the eurozone is left to fail, according to Prime Minister John Key.

Key told hundreds of businesspeople at KPMG's annual tax briefing in Auckland today that his recent trip to Europe had reinforced his belief that the euro will not "blow up" because it was considered more of a political alliance than an economic one by EU nations.

"The problem is they see it as totally political, so if Spain goes then France goes and if France goes then, well, you're back to a situation of aggression and real concern politically in Europe like we've had so often before in the past.

"So those leaders are not letting the thing go down, they will not, they'll do whatever it takes, but the problem is they'll just kick the can along the road. They'll do enough to get themselves through, but not enough to fix the problem.

"I'm not saying there aren't good markets in Europe, I'm not saying there aren't great opportunities, but I'm telling you now there will not be very substantial growth in Europe for a long period of time," Key said.

His comments came as local shares slipped on renewed fears of a European collapse.

Reports out of the Euro summit this morning suggested leaders were battling to find a way to help support Spanish and Italian bond levels, with Germany still refusing to compromise on the issue of common eurozone bonds without greater fiscal controls.

Even the powerhouse German economy was leveraged with debt amounting to 80 per cent of its GDP, where as New Zealand was at about 23 per cent, said Key.

Greeks regarded not paying taxes as a "national pastime" so the government there was resorting to a property tax which, if not paid, would result in utility services being cut to the property, he said.

The Spanish were facing a $340 billion housing bubble based on property built for English visitors who were now not coming: "So that's a write off; it's South Canterbury Finance on steroids basically," said Key.

"If you want my view there will not be growth in Europe in any meaningful way for a very long period of time they just do not have the levers to pull to make their economies go faster."

Key said his government was doing the right thing by "holding course" with its economic policy.

"[Australasia] is in great shape; we've got very flexible economies, we're not indebted and we just need to keep holding that course.

"We are not that correlated to Europe, it's just a problem if Europe slows down China and Australia."

"The trouble for New Zealand is the low hanging fruit has already been plucked, the really easy things to do just aren't there anymore.

"You can't just go and liberalise this and that. We've got liberal trade laws, and flexible labour markets and we have unicameral [one house] government, we have pretty low levels of bureaucracy," he said.

- © Fairfax NZ News