This is an excellent piece of analysis from Mr. Taylor from Reuters. In the short-term, he is correct about the political calculus. We have a Mexican stand-off with three participants: the creditor nations like Germany who have to pay for everything, the debtor nations like Spain who need money but do not wish to ask for it and the ECB who prefers a fiscal solution to its monetary one.
The debtor nations hold the cards here, because their default would be catastrophic. A default must be avoided above all else, but who is going to pay?
The rich, Northern countries are actually not as rich as you think with even Germany having a 90% debt-to-GDP ration. They simply cannot afford to bailout the southern countries.
That leaves the ECB, and all it can do is print money to forestall the inevitable restructuring of Spanish and Italian debt (with France to follow). Therefore, that is what we will see. BTW, as the Fed and the Bank of Japan have learned, once you start printing, you cannot stop. As Chuck Prince infamously said, “If the music is playing, then we have to get up and dance.”