The EU debt crisis intensified further on Wednesday, which was reflected in the extremely poor result of the government bond auction held in Germany. The Bunds, until now considered a safe-haven in the Eurozone debt market, fell victim to the increasing mistrust of investors towards the euro project.

Due to very low demand, the German government sold merely €3.644 billion of the €6 billion in 10-year bonds on auction, at a much lower yield than usual, of around 1.98%.

Other EU countries have also felt the pressure exerted by the escalating debt crisis on their risk premiums. The Italian 10-year government bond yield reached 7%, the Spanish 6.65%, the French 3.63%. Belgium, which recently fully felt the contagion of the debt crisis, witnessed a rise of its risk premium to 5.12%.

"Time is running out for the Germans to act," convinces Kathy Lien, Director of Currency Research for GFT, who believes that the alarming result of the German bond auction should be the last straw: "Today's auction serves as a reality check for the Germans who cannot turn their backs on the rest of Europe for much longer. The bund auction was the straw that broke the euro's back, erasing any goodwill creating by the IMF's offer of liquidity yesterday. Investors are wary of holding any European assets and if the Germans want to reverse this vicious cycle, they need to dump more money into the EFSF."

Meanwhile, the European Commission put forward a draft project of a set of laws which will allow it to inspect the EU Member States budgets and check whether the countries carry out all the required fiscal adjustment reforms and do not break EU rules. According to the EC President José Manuel Barroso: "To return to growth, member states need to raise their game when it comes to implementing their commitments to structural reforms, as well as embrace deeper integration for the euro area. The goals driving this package - economic growth, financial stability, budgetary discipline - are linked to each other. We need all of them if we are to move beyond the current emergency towards a Europe in which solidarity is balanced by strengthened responsibility."

In Greece, the country's central bank issued a warning on Wednesday that unless the new government accelerates the debt-reduction reforms, the country will be forced to leave the Eurozone. The central bank presented an alarming outlook for the Greek economy with the GDP decreasing by 5.5% in 2011 and growth not returning till 2013.

France faced more pressure on Wednesday as the Fitch rating agency published a special report on the country's public finances, stressing that the rise in the country's government debt made it more vulnerable to further crisis shocks. Like Moody's on Monday, Fitch suggested that this situation threatens France's current AAA rating.