Debt crisis: as it happened, June 12, 2012

German Chancellor Angela Merkel said banks must be allowed to fail if they run up unsustainable losses because her government can’t afford to rescue them a second time after the 2008 financial crisis.

An official for the Bank of Italy says Bonds Bids, Offers Show Government Bond Market "Frozen". Spreads between bid and ask government bond prices indicate markets are “frozen,” said Franco Passacantando, Bank of Italy’s Managing Director for Central Banking, Markets and Payment System in Milan today.

  Back in 2011, I predicted that when push ultimately came to shove, Germany would leave the Euro before it picked up the full tab. The reasoning is simple: the Germany population will not stand for rampant monetization. They know how that ends (Weimar) and they will kick out any politician who seems to support the idea.   German Chancellor Angela Merkel has walked a tightrope over the last few years of keeping the EU together without infuriating the German populace to the point of having to abandon ship.  

  Back in 2011, I predicted that when push ultimately came to shove, Germany would leave the Euro before it picked up the full tab. The reasoning is simple: the Germany population will not stand for rampant monetization. They know how that ends (Weimar) and they will kick out any politician who seems to support the idea.   German Chancellor Angela Merkel has walked a tightrope over the last few years of keeping the EU together without infuriating the German populace to the point of having to abandon ship.  

  The single most important issue for Europe today remains Germany on both an economic and political front.   German Chancellor Angela Merkel has walked a tightrope over the last few years of keeping the EU together without infuriating the German populace to the point of having to abandon ship.  

Any funds for Spain will be tied to reforms of its banking sector, German Chancellor Angela Merkel said on Tuesday, adding the situation was different for previous bailouts of Portugal, Ireland or Greece."There will of course be conditionality for Spain, when the application comes, namely a restructuring of its own banking system to make it fit for the future," Merkel told the economic council of her conservative party here.

The technocratic governments in Italy and Greece are not off to a smooth start judging from the action in the bond market. A quick glance at the 10-Year note in Italy shows the yield is up 25 basis points to 6.70% and the Spanish 10-year note is up 24 basis points, soaring through the 6% mark to 6.09%.Meanwhile, Greek 1-year bonds are trading at a mere 250%. Any bets on when they exceed 300%?