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Eurozone members wary of buying other countries' bonds

Spainish Finance Minister Luis De Guindos (L) and Luxembourg Prime Minister and Eurogroup president Jean-Claude Juncker joke prior an eurozone meeting on March 12, 2012 at the EU Headquarters in Brussels.

Jeff Horwich:  With the summer holidays over, several European countries are looking to borrow money for things like road construction and paying government workers.

There was a time when one European country could issue bonds and count on banks in the other countries to buy them. Those days are gone -- as Christopher Werth reports from London.


Christopher Werth: In those first giddy days of the euro, eurozone countries were like a young couple moving in together.

Steve Martin in "The Jerk": Honey, will you marry me?

They combined their finances. French banks bought Spanish government bonds. German banks bought Italian bonds. That is, until the debt crisis, and the risk that a problem in one country could take down the banks in another. Now, eurozone members are like Steve Martin in the movie "The Jerk": grabbing what's theirs, ready to move out.

Steve Martin in "The Jerk": I don't need this stuff. And I don't need you. I don't anything, except this, and this paddle game.

Today, many French and German banks have cut the amount of debt they hold from troubled euro zone countries by half. And practically the only buyers of Spanish debt are Spanish banks. Ditto for Italy. Not only does that make borrowing more expensive, the fear is that -- like any relationship -- a separation of the eurozone's finances could make it easier for the euro to break up completely.

Francesco Caselli is with the London School of Economics.

Francesco Caselli: It makes it more likely because Germany doesn't have to worry too much about what will happen to its own banks if Italy defaults or leaves the euro.

The hope now is the European Central Bank will step in as a buyer of last resort, and save eurozone members from eventually filing for divorce.

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