This morning the German government held an auction for 10-year money at just under 2 percent. The auction failed disastrously with a bid-to-cover ratio of just 1.1. The Germans wanted to issue 6 billion euros of 10-year bunds but managed to sell only 3.64 billion, with the central bank picking up 39 percent of the issue.

Many media outlets are reporting the disastrous bond auction results in Germany as an ominous sign. I am of two minds on this. Yes, this was a terrible auction but it is just one auction. So let’s not blow it out of proportion. There is still some time left.

On the other hand, the economic data this morning made clear that Europe is in a recession and that Germany and France are being dragged in tow. The euro zone PMI Composite came in at 47.2 (higher than expected) but below the 50 boom/bust divide. Germany’s Manufacturing PMI too was lower than 50 at 47.9. And it was lower than expected. I told you 1 1/2 years ago that Spain’s debt woes and Germany’s intransigence lead to double dip and now we are seeing this. Even India and China are slowing, with Chinese manufacturing data at 32-month lows.

Finally, I have to beat this into everyone’s heads because I have said it over and over again. It’s the currency sovereignty, folks! No lender of last resort means:

This is a rolling crisis wave through the eurozone infecting more countries, closer and closer to the core.  As Marshall wrote recently, this is a structural problem. All of the euro zone countries face liquidity constraints and all of them will eventually succumb to the rolling wave of yield spikes one by one until we get a systemic solution: full monetisation and union or break up.

Germany is no different than the rest.

This post originally appeared at Credit Writedowns and is reproduced with permission.