Germany and France may be forced to contemplate the bailout of entire nations rather than just individual banks as European government budgets buckle under the weight of recession.

German Finance Minister Peer Steinbrueck became the first senior policy maker to broach the topic this week, saying some of the 16 euro nations are "getting into difficulties" and may need help. French officials are also concerned about market tensions as the cost of insuring Irish, Greek and Spanish debt against default rises to records and bond spreads widen.

The nightmare for Angela Merkel and Nicolas Sarkozy is that widening deficits will prompt investors to shun the debt of some countries, sparking a region-wide crisis. While few investors are yet forecasting any defaults, the mere risk of it may prompt the bloc's two richest economies to ignore the European Central Bank and announce their willingness to come to the rescue.

Eventually even Germany will run out of funds to help fiscal stimulus in weaker Eurozone economies and the ECB will have to whip out of its monetarist slumber.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith