GERMAN CENTRAL BANK REITERATES OPPOSITION TO EUROBONDS

German and French governments last week laid out further reforms of the euro zone which some say could eventually move it towards some form fiscal union, but there is substantial opposition in Germany to steps that would lead to it taking responsibility for other countries' debts.

Individual countries should primarily deal themselves with the fallout from soft fiscal policy rather than the consequences being split among the bloc or dealt with in a transfer union, where some countries finances others, the Bundesbank said.

And yet the July 21 agreements went in exactly this direction, said the German central bank, which has been a vocal opponent of some of the support given to ailing euro zone governments.

"The latest agreements result in a further big step towards joint liability and reduced disciplining via the capital markets," it said in its August monthly report.

THOSE HOLDING LOTS OF IFFY SOVEREIGN PAPER WANT THE GERMANS TO GUARANTEE THEIR RISK.

GERMANS RIGHTLY ARE RESISTING.

EURO-SOCIALISM NEEDS TO BE REIGNED IN, AND NOT MERELY SUPPORTED BY ANOTHER TEMPORARY SOURCE OF INCOME. (EVENTUALLY, THEY'D RUN OUT OF GERMAN MONEY TOO!)

THIS TRANSITION WILL BE PAINFUL - BUT LESS SO IF DONE SOONER AND VIA THE COURAGEOUS EXERCISE OF POLITICAL WILL, THEN IF IT COMES AFTER A HARD CRASH.

I EXPECT AND HAVE PREDICTED A HARD CRASH.

STAY TUNED...

EVENING UPDATE:

THE FALL OF GADDAFY HAS TEMPORARILY BUOYED THE MARKEETS.

IT WON'T LAST.