Perpetual sovereign debt agonies in Greece tend to get most of the European headlines, but the hidden cracks in the region's corporate debt system, where many companies are battling to service their loans, could be the malfunctioning engine that derails the entire eurozone recovery.

Euromoney reached that conclusion in an analysis based on various reports of the International Monetary Fund (IMF).

One IMF report in October concluded that European banks' "inadequate provisioning for a wave of bad corporate debt threatens growth, investment and employment prospects for years to come, without urgent redress," Euromoney reported.

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Many non-financial firms in Germany, France, Italy, Portugal and Spain, especially in the cyclical and manufacturing sectors, are sinking under the weight of their debt, the IMF said.

In Italy alone, corporate loan losses exceed banks' existing provisions by approximately $72 billion, Euromoney noted.

"It is important that banks have adequate buffers to deal with these risks," said Jose Vinals, head of the IMF's monetary and capital markets department.

"In some cases, there will be a need to have corporate debt workouts that lower the debt burden of the firms to a more sustainable level."

The eurozone corporate debt sector, including banks, were heavily indebted, at 105 percent of GDP, in the second quarter of 2013, compared with 78 percent in the United States, according to the European Central Bank, Euromoney reported.

The Institute of International Finance warns that the eurozone corporate debt overhang could start a new wave of bank deleveraging while corporations, grappling with large debt, will be forced to sell off assets.

Vinals said there are concerns that the negative bank-corporate feedback loop will worsen without fiscal precautions such as improved corporate bankruptcy laws and collateral rules.

In an opinion piece for Project Syndicate, Kemal Dervis, vice president of the Brookings Institution and a former U.N. Development Program administrator, said the $550 billion current account surpluses of Germany and surrounding Northern European countries is placing a huge economic strain on their impoverished Southern European neighbors.

Southern nations like Spain and Greece, where the jobless rate exceeds 20 percent, "are trying to achieve a difficult 'internal devaluation' — that is, a reduction in their domestic unit labor costs relative to the eurozone's stronger economies — while the overall eurozone surplus caused by Northern Europe puts upward pressure on the exchange rate, undermining their competitiveness outside the monetary union," Dervis wrote.

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