Diametrically opposed statements by top European leaders

"As long as I live there will be no collective assumption of debt in Europe." German Chancellor Angela Merkel has clarified her intentions in view of the crucial EU summit on Thursday and Friday and caused a new round of doomsday scenarios on the next day and the Eurozone cohesion.

During her meeting with the Liberal Democrats in Berlin, Merkel stressed that the "public debt scenario," is against the German Constitution itself, hence it is not applicable even to Germany itself, thus giving the final blow to the series of scenarios about raising the debt issue again in the forthcoming summit; namely, the issuing of Eurobonds, from France, Italy, Spain and possibly other European countries.

But at the same time Italian Prime Minister Mario Monti said that there must be a lasting solution at the EU leaders’ summit to permanently address the State debt crisis, adding that he is ready to stay in Brussels until Sunday to reach an agreement between the leaders.

He stressed that he will attend the meeting and will seek to strengthen the development and stabilization of markets, suggesting that Italy will not be the only country that will push in this direction. He also commented on the public stance of Bundesbank President Jens Weidmann, who had rejected the Italian proposal to use EU funds to reduce borrowing costs for countries that comply with the financial framework, saying that the German banker "misunderstood" the meaning of the Italian proposals.

The pressure expected to be put on Germany by the Italian prime minister is easily explained if one considers that as each day passes, the Italian economy flirts more and more with collapse, something that became clear earlier today, Tuesday, when it was announced that the Italian government decided to give to the problematic bank Banca Monte di Paschi di Siena a loan amounting to 2 billion euros in an attempt to support one of the weakest links in the Italian banking system.

It is the first major recapitalization of an Italian bank directly from the Italian State since the day the crisis climbed the steps of the neighboring country and analysts are not hiding their concern, as this is just how Spain’s countdown to the support mechanism had started.

A Spain that is now threatened by a new, sweeping downgrade by Moody's rating agency. On Monday night they assessed most banks in the country as junk and are now getting ready to do the same for the Spanish economy as a whole. 

Specifically, citing the soaring heights of CDS and spreads, Moody's are reportedly ready to downgrade Spain to junk, in a process which means a degradation of up to 4 levels for the fourth largest economy in the Eurozone. Analysts of the house allegedly told the Bloomberg agency that not only the Spanish banks, but the whole country itself are in need of rescue.

Meanwhile, the problems for the Cypriot economy are multiplying too. As announced on Tuesday, the ECB will now stop accepting the State bonds of Cyprus as collateral.

A representative of the central bank stressed that the Cypriot bonds will no longer be accepted after the decline of the country's credit rating below the minimum investment criteria of the ECB, which practically means that the lines of European funding for local banks are now closing…