Anyone else want to chime in? I'm increasingly convinced that Schauble and Merkel are deliberately engineering this entire crisis, timed to peak between the end of 2012 and mid-2013, in order to give them maximal leverage over a new EU treaty for fiscal and political union. No one else has a clue what is going on in Berlin.
At some point you have to decide whether you think they are the Elders of Frankfurt or a bunch of morons who don't get economy as well as you. Or you could lower the hyperbole down to something a little less shrill.
In my opinion they are just between a rock and a hard place. On one side they wish keep the markets from getting a hysterical episode again, but they also have a population who have no wish to pay the Greeks again, especially not after the Greeks pulled the Nazi card. Of course there's also the element that the German doesn't wish to end up in the same situation 20 years into the future, if they had just bought the Greek debt, and they wished even less that a common Eurobond pulled Germany down in the future, because it would allow more state behave like Greece. So they try to make time for Greece to begin its reforms and prayed that the market would find something else to get a hysterical episode about, so the could get room and time to push greater structural changes through and maybe get a little growth going in South Europe.