More retsina, per favor

Ah yes, the euro. You will remember that the Germans have said they won't bail out the southern periphery unless they start making the required fiscal changes, install a bit of discipline. However when it began to look as if they would have to bail out Spain's banks as well as its government, this was applied to banks, too. There would have to be eurozone-wide regulation of the banks, a banking union.

That is why eurozone leaders are having lunch a meeting in Nicosia, capital of Southern Cyprus, which holds the rotating presidency.

Just in case they can't see through the fog of retsina, here is the problem. The centralised regulator in Frankfurt says that a particular bank in, say, Spain is insolvent and either needs an injection of capital or to be closed down. The Spanish don't like the idea of it being closed down, particularly by Germans, because it is a regional bank in an important political area. So: rescue. But neither the regulator, nor his bosses at the ECB, has access to a rescue fund: there isn't one, countries are expected to rescue their own banks. But Spain hasn't got any money; could it have some from the rescue fund for governments, the ESM, to give to its banks? Wass? Nein nein nein, the condition of the rescue is that you let the banks go bust, dumkopf.

It isn't going to work unless there is a rescue fund for banks, of perhaps half a trillion euros, centred in Frankfurt; but that would mean giving them money without discipline, which the Constitutional Court won't agree....