Bundesbank President Weber has been the most candid to date about what the ECB could do in case Greece is downgraded again, especially by Moody's.

Recall the problem: Prior to the crisis, the ECB would take as collateral only paper rated A- or better. During the crisis they have extended it to BBB-. It is due to revert back at the end of the year. Fitch and S&P rates Greece below A-, leaving only Moody's above the normal threshold.

The Bloomberg video is a bit sensationalist in my opinion. But it gets to the heart of the problem in Europe, namely Spain. Spain has an economy and debt which is an order of magnitude larger than Greece. That means that problems in Spain are more critical than in Greece. But it also means that an EU bailout would simply not be feasible.

Watch the video and I will make a few other remarks below.

According to Bundesbank President Axel Weber, Germany’s economic recovery is “essentially intact”, and is now set to benefit from stronger demand in countries outside the euro region.

“I firmly believe that the recovery process that began in summer 2009 is essentially intact, and that it will continue despite the slower growth dynamic in the winter semester. An additional factor in this context is that the German labor market continues to be in extremely robust shape.”