Well, that sigh of relief lasted about three days. Italian bond yields have returned to the failsafe level of 7%, and Spanish debt yields are flying up almost as fast, currently topping out at 6.3%. And now France is feeling some pressure:

Concern centered on France, whose borrowing rates for euro-denominated debt spiked to near record levels. Though the nation also posted figures that showed a slight rise in its economy of 0.4 percent in third quarter, investors remained nervous about the exposure of French banks to the troubled debt of Greece, Italy and other more heavily indebted European countries.

Should Paris be forced into a heavy intervention to prop up its banking system, the price tag could cost France its cherished AAA debt rating. That rating would also be in jeopardy should Europe move to dramatically boost the size of its rescue fund to help Italy. The price tag for France — Europe’s second-largest economy — could shake its solvency.

The reasons are obvious, you need only look at the fundamentals. The Eurozone is at best stagnant and probably headed for recession. The economy grew at just 0.2% in the Eurozone in the third quarter, and that was prior to much of the turmoil in Greece and Italy. The southern periphery is dragging down the relatively stronger nothern tier, and the northern countries – France and Germany – are determined to do nothing about this but ask for austerity, which only throws those countries into depression and increases their budget deficits.

The head of the German central bank, the Bundesbank, obstinately refuses to allow the European Central Bank to become a lender of last resort to the struggling Eurozone nations, whose own central banks do not have control over the currency. Jens Weidmann’s assessment is almost sadistic in its implications; with the announcement of official impotence for the ECB, almost every sovereign in the Eurozone saw increases in the cost of borrowing. In fact, last week the ECB slowed its purchases of Italian bonds, precisely at the crisis hit its fever pitch. And their tendency to talk down bond-buying is generating a self-fulfilling prophecy, where their actions only hurt the sovereigns. “It’s like watching a slow-motion train crash,” the Financial Times quoted one banker in London.

About the only thing the EU has done right recently is to ban naked CDS on sovereign debt, to at least tamp down some of the exposures and stop the speculative feeding frenzy. But that’s just a band-aid. Europe is staring down the barrel of recession, default, and maybe depression. They do not have the political will or intestinal fortitude to make the decisions necessary to avoid any of this. At least, that’s how it looks right now.

Elections in Spain over the weekend could be the next bend point. The conservative People’s Party is expected to win an absolute majority and then initiate their round of austerity. If they are unable to win a majority, you could see the EU muscle in the way they have in Italy and Greece.