Free Republic

rise in the number of banks giving up primary dealer roles in European government bond markets threatens to further reduce liquidity and eventually make it more expensive for some countries to borrow money. Increased regulation and lower margins have seen five banks exit various countries in the last three months. Others look set to follow, further eroding the infrastructure through which governments raise debt. While these problems are for now masked by the European Central Bank buying 60 billion euros ($65.5 billion)of debt every month to try to stimulate the euro zone economy, countries may feel the effects more sharply...

On Thursday night, Italy and Spain plunged an EU summit into disarray by threatening to block “everything” unless Germany and other eurozone countries backed their demands for help. Mario Monti, the Italian Prime Minister, celebrated the agreement, reached in the early hours of Friday, as a “very important deal for the future of the EU and the eurozone”. He could not resist reminding Angela Merkel, the German Chancellor, that Italy had also won on the football pitch, by defeating Germany two goals to one for a place in the finals of the European Championship.

Angela Merkel has firmly rejected the use of eurobonds ahead of a crucial summit in Brussels this week, ruling out jointly guaranteed eurozone debt for "as long as I live". The German Chancellor's comments were met with applause as she briefed MPs from the Free Democrats party, her junior coalition partner, at an assembly meeting on Tuesday. One official told AP that the crowd "reacted with applause to hearing that the Chancellor does not want a joint debt liability," while one participant reportedly shouted: "We wish you a long life!" Several eurozone leaders, including French President Francois Hollande and Italian...