Pressure mounted on Wednesday for the European Central Bank to intervene more decisively after financial markets judged that yet another EU summit had failed to resolve the euro zone's debt crisis.
But Germany's powerful central bank chief, Jens Weidmann, an influential voice in the ECB, made clear his opposition to ramping up the ECB's purchases of euro zone government bonds.
He also said the Bundesbank would only provide fresh funds for the International Monetary Fund to help fight the euro zone crisis if countries beyond Europe did so too.
The euro sank to an 11-month low against the dollar, stocks slid and Italy had to pay a euro era record yield to sell 5-year bonds as nervous investors awaited a possible credit rating downgrade for one or more euro zone countries.
Rome had to pay 6.47 percent to sell 3 billion euros of bonds, up from a record 6.29 percent a month ago, highlighting fierce market pressure ahead of a year in which Italy has a gross funding goal of 440 billion euros starting in late January.
Ireland's European Affairs Minister, Lucinda Creighton, said last week's summit agreement among 26 European Union states, with Britain dissenting, to negotiate a new fiscal pact to enforce EU budget rules more strictly was not going to stop the crisis.
Having the fiscal compact in place by March is desirable but I don't think it's going to save the euro, she told reporters on a visit to Paris.
Ideally (I would like to see) a very clear declaration from the ECB that it is prepared to do whatever is necessary to save the currency, and it is the ultimate backstop, Creighton said. I don't think we're there yet but I feel we will end up there.
Another ECB policymaker, Yves Mersch of Luxembourg, gave a scathing response to such calls, saying the bank could only do what was in its mandate.
There are countries that say we should go into our cellars and print money but then they have to find the majority to implement this, Mersch told journalists. Creighton said the ECB's mandate to uphold price stability meant it should act to ward off the risk of deflation as well as inflation.
Ireland and France saw eye-to-eye about the need for the central bank to act as lender of last resort, but there was no consensus on this yet, she said. Paris has toned down calls for ECB action, stressing its respect for the bank's independence partly in deference to its close alliance with Germany.
Creighton warned that the crisis was likely to accelerate when countries such as Italy and Spain went to market in January and February to raise funds. They will be challenged. We've yet to see the scale of that challenge, she said.
Weidmann told journalists the ECB's mandate prevented it from embarking on unlimited bond purchases and experience showed this would inevitably lead to inflation anyway.
I think the idea is astonishing that one can win confidence by breaking rules, he said.
Italian Prime Minister Mario Monti told the Senate in Rome that some of the summit's decisions on strengthening financial firewalls to protect vulnerable nations in the euro zone were significant, but had fallen short of Italy's expectations.
Both Monti and Ireland's finance minister voiced renewed support for issuing common euro zone bonds, which German Chancellor Angela Merkel firmly ruled out last week.
Another ECB policymaker, Dutch central banker Klaas Knot, put the onus back on EU governments, saying European leaders can solve the debt crisis if they increase their financial rescue fund to at least 1 trillion euros.
As long as we have a prospect of substantially more firepower I am positive. And whether that happens by increasing the rescue fund or by higher contributions to the IMF does not make much difference to me, Knot told the magazine Vrij Nederland. He said he expected the crisis to remain with us for the next two years.
Merkel ruled out increasing the size of the euro zone's planned permanent rescue fund, the European Stability Mechanism, beyond the agreed 500 billion euros, according to participants at a closed-door meeting in parliament on Tuesday.
But the man who chairs EU summits, European Council President Herman Van Rompuy, said a review of whether the funds were adequate would be completed in March.
The renewed cacophony among European policymakers, just days after the 16th summit since start of the debt crisis, unsettled financial markets as they await an imminent decision by Standard & Poor's, which put 14 euro zone countries' credit ratings on negative outlook for a possible downgrade last week.
Creighton said it would be a matter of great concern to the whole euro area if France, the second largest guarantor of the euro zone rescue fund, were to lose its AAA rating.
Strains over euro zone bailouts have caused deepening ructions in Germany, the EU's main paymaster, tugging at Merkel's fractious centre-right coalition.
A senior leader of the liberal Free Democrats, junior partners to Merkel's conservatives, resigned unexpectedly on Wednesday in the latest sign of turmoil as the party awaited the outcome of a membership referendum on euro zone rescue moves.
Christian Lindner, 32, quit after the party leadership was criticized for saying prematurely that the referendum called by eurosceptics had failed to mobilize the necessary quorum to force a change in FDP policy.
The result of the ballot, which closed on Tuesday, is due to be announced on Friday. FDP leader Philipp Roesler, who is vice-chancellor and economy minister, is also under pressure to quit but sources close to him said he would not resign.
A senior EU diplomat said Merkel had signaled in the run-up to last week's European summit that her ability to make advances on euro zone rescue moves was limited until after the vote.
(Additional reporting by Gilbert Kreijger in Amsterdam, Sakari Suoinen in Frankfurt, Valentina Za in Milan, Erik Kirschbaum in Berlin, Michele Sinner in Luxembourg; Writing by Paul Taylor; Editing by Giles Elgood)