David Prosser: Alarm bells ringing again in Portugal

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The Independent Online

Outlook The eurozone crisis is back. The yields on Portuguese government bonds hit their highest ever level since the launch of the single currency yesterday.

It isn't immediately clear what has prompted the latest spike, but with Portugal due to refinance billions of euros of debt in both April and June, the March summit of eurozone members, which is supposed to come an understanding on expanding both the role and the size of the European Financial Stability Fund, is now more crucial than ever before.

The question remains, though, what is Germany prepared to countenance? Those who fear Angela Merkel's government will not feel able to compromise are concerned the discussions are moving away from them.

The vacillations of Axel Weber, the President of the Bundesbank, could prove to be a real headache. Until this week, Mr Weber was seen as the leading candidate to succeed Jean-Claude Trichet as President of the European Central Bank when his term of office expires next year. Now it seems Mr Weber does not want the job.

For Ms Merkel, a Weber candidacy was a useful tool in defusing domestic criticism of her eurozone negotiations. That a German was in line to take the helm at the ECB would have been a counterbalance to compromises on an extension of the EFSF, which many Germans oppose, especially if Ms Merkel is unable to secure the stringent new fiscal rules and penalties that her Government wants other eurozone members to sign up to.

Without that extension, the eurozone crisis really will break out all over again. Ms Merkel may not like the idea personally, but she is a pragmatist who will put the future of the euro before all other considerations. That is assuming, however, she is able to deliver.