The sharp turnaround in the Italian stock market in Europe’s afternoon dragged the other major indices down with it.

As Asia Unhedged wrote earlier this morning, the sustainability of this kind of bailout is extremely questionable. As Germany’s leading financial newspaper Handelsblatt observes, this is very different from the Santander bailout of Spain’s Banco Popular. Santander financed the takeover with a capital injection, while Intesa Sanpaolo “gets a dowry of 5.2 billion Euro.” Once again, the 17 billion Euro commitment of the Italian state is larger than the prospective proceeds of a VAT reform now under discussion.

The whole of the German financial establishment, from the finance ministry to the leadership of Angela Merkel’s Christian Democratic Union, denounced the bailout as a violation of the basic principle that taxpayers should not get the bill for bank failures. Several German politicians said that the bailout killed the prospects for a European banking union with a common guarantee for depositors, because common guarantees of deposits was unthinkable when one European country would have to guarantee deposits of banks in a dodgy country.

Yesterday Bundesbank President Jens Weidmann ruled out the common Eurobond gimmick. The European Commission was circulating a plan under which it would put the government bonds of various European countries into trust and create a kind of collateralized debt obligation whose senior piece would trade like German bonds. That’s a signal to Italy that further bailouts of its government debt (as with the current quantitative easing program) wouldn’t be forthcoming.

Italy, in short, is still playing games, and the market will have to hold its feet to the fire. Asia Unhedged is a better seller of Italian sovereign debt.