German hard line on Italy may rebound with Deutsche in crisis

The possibility that Deutsche could run short of capital if it is overwhelmed by penalties puts Berlin in a more vulnerable position than before, possibly undermining any push for a tough solution for Italy. "They have taken a very doctrinaire line with the Italians," said Simon Tilford of the Centre for European Reform, a London-based think-tank. "Maybe this gives Germany cover to soften their line."

...Tilford believes that an amicable end to the tensions between Germany and Italy is now important both for tackling the banking problems and for the unity of the 19-member euro currency area. "What Germany has sought to do since the start of the crisis is avoid any costs to its banks or taxpayers," he said. "The big fault line in the euro zone is between Italy and Germany."