ECB caught in the middle

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In one corner, Germany. In another corner, Spain. In the middle is the European Central Bank.

Although German Chancellor Angela Merkel has softened her stance on Greece of late, there is still a sense Germany is "tisk-tisking" through the long -- not to say endless -- negotiations that still have not resolved Europe's sovereign debt crisis.

Greece has been asking for a two-year extension on some of the terms the troika has demanded in response for ongoing access to international loans -- the troika being the European Central Bank, the International Monetary Fund and the European Commission.

It is hard to imagine conservatives in Germany, the Netherlands, Austria and Finland, among others, will really slam the door on assistance for Greece, in part because Greece has been willing to accept the terms the troika imposes -- deep austerity budget cuts, higher taxes and sales of government assets.

Greece is asking for time, but not, Prime Minister Antonis Samaras insists, for other changes in the terms themselves.

Spain is an entirely different story. The European Central Bank said after its last policy meeting that struggling countries -- Spain and Italy -- must first request assistance from the European Financial Stability Facility or the European Stability Mechanism before it would consider buying government bonds, which is what Spain is banking on.

Spain's Finance Minister Luis de Guindos said recently Spain would likely use about 60 percent -- or $75 billion -- out of the $125 billion made available in June by eurozone finance ministers.

That money would go to restoring bank balance sheets after a 10-year accumulation of toxic assets.

Is that enough? Spain has hired consultants to figure that out. Currently, de Guindos said the consultants at Oliver Wyman would likely be close to the $75 billion estimate.

But de Guindos said after that, it would be time for the ECB to step up to the plate.

Bond-buying "is going to reassure markets and is going to be an important helping hand," he said.

He also said, "We have to give reassurance to the ECB that we are going to have to meet our commitments."

Spain pulling through with a finite, clearly defined assistance package would certainly be a major contributor to restoring confidence in the eurozone. But this still may take convincing Germany that central bank bond-buying is necessary.

ECB President Mario Draghi speaks in Jackson Hole, Wyo., Saturday at the Federal Reserve's annual retreat, which has lately been the platform of choice for announcing policy change. If so, Draghi will have a tough act to follow, given U.S. Fed Chairman Ben Bernanke's speech in Wyoming is scheduled for Friday morning.

Many expect Bernanke will use his speech to announce a third round of quantitative easing. It will be tough for Draghi to follow that with a speech that admits the ECB is hobbled while Germany plays the spoiler.

In international markets Tuesday, the Nikkei 225 index in Japan shed 0.57 percent, while the Shanghai composite index in China added 0.85 percent. The Hang Seng index in Hong Kong was flat, gaining 0.07 percent, while the Sensex in India shed 0.27 percent.

The S&P/ASX 200 in Australia rose 0.36 percent.

In midday trading in Europe, the FTSE 100 index in Britain dropped 0.38 percent, while the DAX 30 in Germany lost 0.87 percent. The CAC 40 in France slipped 1.08 percent, while the Stoxx Europe 600 gave up 0.9 percent.