Merkel and Cameron meet: wonder what they will say

1. Fly on the wall moment: British Prime Minister David Cameron visits Berlin today for a meeting with German Chancellor Angela Merkel. What will they really say to each other?

Britain's relationship to the euro zone is roughly that of Ishmael's boat to Moby Dick. If the big Sperm Whale chooses to dive, or flap its flukes Ishmael is going to get very wet and possibly drown.

Cameron, like virtually every other political leader in Europe and the U.S. wants Merkel to loosen the strings on the European Central Bank so it can get more directly involved in providing liquidity to Italy and now, Spain (see item 2).

Merkel says "Nein" with the force that Soviet leaders used to say "Nyet."

But there is more. When the going gets tough in Europe, British politicians get going. The flight towards euro-skepticism and re-negotiating Britain's relationship make regular appearances during EU crises in the British press. This present moment is no different. Right wing papers are in full cry about secret German plans to do via the euro what it wasn't able to do via the Wehrmacht and Luftwaffe. Conquer all … uber alles, meine Freunde, uber alles.

An American wants to shout, "grow up!" but then British friends will send youtube extracts of Herman Cain or Rick Perry and say to an American, "Pot-Kettle-Black."

2.
Flying under the radar: Spain is now lined up to be the next euro zone nation to undergo a bond attack. Yesterday, the country issued a tranche of 10 year bonds and had to pay 6.975 percent interest on them. Last month the yield on Spanish 10 year bonds was 5.433 – a big, big jump.

That's a double proof that Spanish sovereign debt is now suffering from the contagion that started in Greece. 7 percent is the witching number where governments begin to need help.

It couldn't come at a worse time. Spain is holding a general election this weekend. The result is not in doubt. The right-wing Parti Popular is going to win and Mariano Rajoy will become Spain's new Prime Minister. He is generally thought to be an austerity advocate but he has kept his plans vague. It looks like the markets will give him no breathing space to put a new economic plan in place.