By Ambrose Evans-Pritchard

LONDON, England - November 14, 2011 - The relief rally from technocrat takeovers in Italy and Greece has already wilted, once again reviving the elemental question of whether Germany will go beyond rhetoric and commit its full strategic power to halt Europe's debt crisis.

Yields on Italy's 10-year bonds jumped back up to 6.7% after Bundesbank chief Jens Weidmann dashed hopes for muscular intervention by the European Central Bank to stabilize bond markets and buy time for the new government of Mario Monti.

"Monetary policy cannot and must not solve solvency problems of states and banks," he told a Frankfurt forum, calling for a halt to incessant pressure from the rest of the world for the ECB to violate its own legal mandate with debt monetization.

Hours later, Germany's Chancellor Angela Merkel called for a "breakthrough to a new Europe and political union" but ruled out Eurobonds, debt-pooling, or any form of fiscal transfers to weaker EMU states in a speech to the Christian Democrat Party conference in Leipzig.

The body language from Germany has washed away any alleged benefits from installing EU technocrats in power in Rome and Athens. Spanish yields have once again crossed the danger line of 6%.

Credit default swaps measuring bond risk have reached record highs of 203 basis points for France and 322 basis points for Belgium, with major knock-on effects in Eastern Europe and the Baltics.