Germany has compromised. The bail out funds can be used to refinance banks directly, and to buy state bonds in the second hand markets after all. Although Mrs Merkel says she is against Eurobonds, using the joint credit rating to raise money for any part of the Euro union, she has in effect now agreed to this by the back door.
The problem with the new scheme is that they have to borrow the money to put into the bail out “funds”. If they borrow it on the credit rating of the bail out fund they have a kind of Eurobond. They are going to need to get on with issuing large quantities of debt to build up this fund. If they are going to beef up the funds with larger member state contributions, then Italy and Spain have to borrow more to help augment the fund, as they are around 30% of the total when it comes to credit status and contributions. We now need to watch their progress financing the funds.