Forex focus: will Germany finally crack on austerity? William Poole of FC Exchange believes the euro is "close to breaking point." Markets have simply rubbished developments. We all seem to know what is needed - some form of mutual debt liability coupled with a pro-growth strategy. The difficulty, he says, is getting the agreement of 17 vastly different economies. Fragility in Spain, however, is breaking the Eurozone's resolve to stick to stringent austerity measures. This month its banks will be given €30 billion - the first instalment of a promised €100 billion bank bailout. EU leaders are frantic to point out it's definitely not a countrywide bailout and that extending the deadline for Spain to cut its deficit is not a default on its debts. As World First's chief economist Jeremy Cook explains: "Spain has to be kept afloat, it's too big to be allowed to sink." Italy, another 'too big to bail, too big to fail" eurozone economy, is also a basket case. Credit agency Moody's has downgraded it two notches saying that Italy is "more likely to experience a further sharp increase in its funding costs or the loss of market access" for borrowing to service its budget. David Kerns of Moneycorp points out: "Rome's borrowing costs have yet to reach the unsustainable levels of Madrid's - but the Spanish government is at least being more proactive in dealing with its problems than its Italian counterpart." A drowning euro is just what Spain and Italy need, but it's not sunk far enough yet to boost demand for their exports. Alistair Cotton of Currencies Direct says: "One of the main problems is they are locked into monetary union with the Germans at an exchange rate that is killing their competitiveness." Ironically a weak euro is really helping the Germans. Cook reckons if it still had the deutschmark it would be 25pc more expensive than the euro. Josh Ferry Woodard of TorFX agrees: "German exports have benefitted hugely from the relative weakness of the single currency. For this reason Angela Merkel will do all that she can to hold the 17-nation bloc together. HiFX's Chris Towner says: "Germany appears to be happy for now doing the absolute minimum keeping the euro area ticking over and taking advantage of a weaker euro. However the crisis is becoming more intense... the crunch time is coming. Even Germany's economy is taking a hit, but its difficulties lie mostly in the political arena. Alistair Cotton of Currencies Direct says: "Merkel is really suffering from waning domestic support and the delay to the constitutional court ruling over the ESM and fiscal pact is a real market frustration. Germany will have to loosen its stance eventually but you know this will only happen at the eleventh hour. In fact, Kerns believes Merkel "could soon find herself under pressure to focus on growth as much as the austerity that has so far been her mantra." The clock is ticking for Europe.