Angela Merkel rejects 'miracle solutions' as Spain debt costs soar Moody's Investor Service slashed Spain's sovereign credit rating by three notches to Baa3, just one level above junk, late on Wednesday, adding to the sense of emergency in financial markets ahead of an election in debt-plagued Greece on Sunday. Mariano Rajoy was reportedly holding a crisis meeting this afternoon. Merkel, addressing parliament in Berlin, rejected "miracle solutions" such as issuing joint euro bonds or creating a Europe-wide deposit guarantee scheme, backed by other leaders such as new French President Francois Hollande and Italian Prime Minister Mario Monti. "It is our task today to make up for what was not done (when the euro was created in 1999) and to end the vicious circle of ever new debt, of not sticking to the rules," Merkel said. She warned against overstraining the resources of Europe's biggest economy, saying: "Germany is putting this strength and this power to use for the wellbeing of people, not just in Germany but also to help European unity and the global economy. But we also know, Germany's strength is not infinite. Italy, rapidly coming into the firing line, saw its three-year borrowing costs spike to 5.3pc at auction today, the highest since December, despite Germany's strong expression of support for Prime Minister Mario Monti's reforms when he visited Berlin on Wednesday. The surging Spanish and Italian bond yields reflect investors' concern that the 17-nation currency bloc has failed to arrest its 2-1/2-year-old debt crisis and faces potential turmoil after a general election that could put Greece on the exit road.