My point here is that the German Constitution substantially restricts the types of actions that the ECB, EFSF or ESM can take. In addition, it seems extremely unlikely that a constitutional amendment could be passed that effectively allows Germany to bailout failed states by monetizing their debts.
One Last, Big, Under-the-Radar Screen
Frankfurter Allgemeine had a fascinating story recently on the TARGET system. TARGET is the short form for the Trans-European Automated Real-time Gross Settlement Express Transfer System. I did not see this picked up in the North American press.TARGET is the system that is used for payments among banks. The latest version of this system went live in November 2007 and is called TARGET2. This is a European system rather than a Eurozone system. (Note that Sweden and the U.K. do not participate.) Here's an overview. The system is very similar to the FEDWIRE system in the U.S. In the U.S., the members (regional Federal Reserve Banks) settle twice a year. All this is routine -- except Germany has racked up a 465 billion euro balance -- they are essentially providing massive credit to Ireland, Greece, Spain, Portugal and Italy -- this is backdoor funding of these troubled countries. For an interesting analysis of TARGET2, read John Wittaker's paper.