Attempts by Germany to renegotiate the structure of the European Stability Mechanism (ESM) just as markets believed things had been settled at the meeting of euro zone leaders last week are an "ominous sign," Simon Derrick, the head of research at Bank of New York Mellon, wrote in a market note.
Merkel wants to discuss the timing and the size of capital injections into the ESM, as well as the speed at which Germany needs to pay in its share of a fixed capital base of the ESB, and the size of its installments for that plan, according to Derrick's note.
"Assurances made over the past month and a half that the details of the ESM would be finalized and approved and this week’s summit might prove ill-founded," he wrote.
"The origins of this very latest leg of the crisis can (be) traced back to February 4th following the forceful rejection of joint Franco-German proposals for enhanced economic convergence in the euro zone - and that the seeds of the previous two legs could be traced back to German comments or intransigence," Derrick added.
Another round of bad news comes from Portugal, where the Prime Minister resigned following the rejection of his new austerity measures by parliament, he also wrote.
The other countries in the euro zone may push for a bailout to happen as soon as possible, in order to ring-fence Portugal off, Derrick said.
"The net result of this has been to turn the euro zone summit from an opportunity for the national leaders to soothe investor concerns to, instead, yet another test of nerves for those that continue to support the region's sovereign debt markets," he wrote.
"The only question that really remains is quite how many times investors will be prepared to endure this continued inability to act in a coordinated and harmonious fashion," Derrick said.