Crisis Over Euro Pits Leader Against Leader

By David I. Templeton: Much of the volatility impacting global markets of late is the result of the European sovereign debt issues. Italy is the latest country to see its bond rates soar.

By Chris Ciovacco: The biggest problem in Italy is the enormous amount of debt they need to rollover in the next year. Some points on Italy from Thursday’s Wall Street Journal:

JEAN-CLAUDE TRICHET, President of the European Central Bank, has come out swinging in the second round of Europe’s crisis of both politics and finance. Yields on the sovereign debts of peripheral euro zone countries stabilised yesterday after Mr Trichet argued that investors are “under-estimating the determination of [euro zone] governments...and indeed the 27 member council”, providing some respite to beleaguered members.

FRANKFURT — The eurozone crisis is not over, France’s reforms are slipping and the Bundesbank has set aside billions in new provisions against what it sees as risky European Central Bank moves, Germany’s central bank said on Tuesday. Presenting Bundesbank 2012 results that showed a sharp increase in its risk provisions, the German central bank’s chief, Jens Weidmann, urged governments to tackle the roots of their troubles with reforms.

TODAY'S biggest news is the word that the European Central Bank is intervening in European debt markets in force, buying up Spanish- and Italian-government debt. The ECB spent last week expressing reluctance to take this step, but without it, the euro crisis threatened to spin irretrievably out of control. What are these purchases all about, and will they work?

George Soros believes someone in the euro zone needs to step up and confront Germany. Maybe even new Italian Prime Minister Enrico Letta.

THERE are many facets to the crisis in the euro zone, but at heart the problem is fairly straightforward. The euro zone developed a balance-of-payments problem; some of the countries in the single currency accumulated large external debts. To service those debts, the deficit countries need to become surplus countries, which is difficult to do without the flexibility of a floating currency.