From DollarCollapse:

The people buying bonds issued by Italy and Spain are clearly looking past the dysfunctional balance sheets and focusing on Germany's reluctance to let a major PIIGS country default. So an Italian bond, in the mind of the market, becomes a German bond.

But this sword cuts both ways. If European debts are tossed into one big communal pot with everyone responsible for everyone else, buying a German bond is the same thing as buying an Italian bond – since German taxpayers are ultimately on the hook for both. Viewed that way, lending money to Germany for 10 years at 2% is hardly risk-free.

Which is why the failure of Germany's...

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More on the euro crisis:

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