"Imagine if the ECB were to intervene in a massive way or promise to stand behind Italian and Spanish bonds no matter what. What then? Yes, the borrowing costs would come down, closer to the pre panic 3%-4% level. And this is the best and a highly unlikely scenario. (...)
Even under a best case 'massive ECB' intervention scenario, Spanish and Italian borrowing costs would not be brought down to UK level. Nor would they have access to economic adjustments through flexible exchange rates. Equally important, additional ECB intervention is likely to be conditional on much stricter austerity in the short term which will almost surely put a recessionary squeeze on the countries that are bailed out."