By Win ThinWe remain dumbfounded that Germany instituted its short-selling ban unilaterally. When Germany first announced the decision, we assumed that other eurozone members would announce similar measures, but that did not happen. French Finance Minister Christine Lagarde said, "We haven't envisioned doing it." It is becoming clearer that the eurozone is not coordinating policy. While we have suggested that this crisis will eventually bring Europe closer together, early signs are not promising. We also stress again that German Chancellor Angela Merkel's blaming of speculators is a page right out of past emerging-market crises. Markets are never impressed with such finger-pointing, and this certainly does nothing to boost Europe's credibility. One bit of news that got lost in the shuffle Tuesday is worth repeating. The Bank of Italy effectively suspended mark-to-market requirements for Italian banks. It said new rules are aimed at "neutralizing" the effect of capital losses (and theoretically, capital gains) on regulatory capital from holding European government bonds. Even though Italian cross-border banking exposure to Greece is relatively small (about $8 billion, or 3%, of the total, vs. 25% for France and 14% for Germany), this tells us that Italian banks' balance sheets are very weak and that they must have significant holdings of peripheral countries' bonds. The authorities are looking to give them some regulatory relief in case things head further south. We would expect similar regulatory relief across the eurozone if Greece and others need to restructure their debt (which we believe will eventually happen). European markets were closed when the German announcement was made, but equity markets aren't taking it well. Most are down 1.5% to 2.0% on the day so far. Eurozone bond yields are mixed, with 10-year Greece and Spain yields up, and Italy, Ireland and Portugal yields down. But overall, peripheral nations' yields remain elevated and point to continued doubts about these nations' ability to service debt. The euro is seeing a bit of a technical bounce, but with the news stream only getting worse, we expect markets to sell into this as well.