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The day Hosni Mubarak was finally pushed from the throne, another autocrat officially called it quits amid entrenched opposition to his policies.

It is, of course, terribly unfair to compare Axel Weber, the departing head of the Bundesbank, to the Egyptian dictator. Weber didn't imprison and torture opponents; he merely advocated fiscal austerity for the peripheral European nations that plainly needed some discipline on that score.

He also saw the European Central Bank's purchases of ailing national debt as undermining that discipline. It was certainly odd to have the anointed successor to ECB President Jean–Claude Trichet opposed to the institution's single most important current policy. And it was Weber's unwillingness to compromise on this issue that made his candidacy to lead the ECB unpalatable to other European governments, he confirmed.

The departure left German Chancellor Angela Merkel in a lurch: She had counted on Weber's hawkish credentials to sell any agreement on a souped-up pan-European rescue fund to the suspicious German voters. Next in line for the ECB job is the well-regarded Bank of Italy chief Mario Draghi. But Italy, with its national debt at 118% of gross domestic product, is hardly a paragon of fiscal rectitude. So, tellingly, a search is underway for alternative candidates from the more northerly climes thought to nurture more prudence.

While Rome Burns
It was the second setback in as many weeks for efforts to resolve Europe's debt crisis. On February 4, Merkel and French President Nicolas Sarkozy tried to sign up their European colleagues for a "competitiveness pact" synchronizing economic policies as the price of a reinforced rescue package. They got sent back to the drawing board by a chorus of objections, from the north as well as south. Many Germans weren't exactly convinced, either.

So European stocks must be down in the dumps again, right? Wrong. Spanish stocks surged 2% to a fresh 10-month high Wednesday, led by the banking sector. The IBEX 35 is up 12% this year, double the gain of the S&P 500. Greek stocks have added 14%, despite an economy shrinking at a 6.6% annual pace. Perhaps shareholders are anticipating that the country won't be able to afford a 12% rate on its 10-year bonds for much longer. Irish stocks have risen 13% since the end of November, in the immediate aftermath of a poison-pill bailout that stands a good chance of subjecting Ireland to the Greek rate of growth.

Telltale signs of investor unease remain. One obvious warning indicator is the bond yields, which for the most hopeless European borrowers are back to December's highs. The ECB has not been buying the sovereign dreck no one else wants for the last three weeks, perhaps to encourage politicians to craft a compromise solution.

But it's got another quantitative easing program pumping cash out the back door and into the zombie banks of the bailed-out economies. Shut out of the financial markets, the banks are issuing cheap debt guaranteed by their all-but-insolvent governments, and then using it as collateral for short-term borrowing from the ECB.

Will the Other Shoe Ever Drop?
Investors in the suddenly high-flying PIGS stock-markets may hope that the shell game can go on long enough to let the debt crisis get choked off by global growth. Or they may be counting on a heads-I-win tails-you-lose resolution next month, in the sense that the Eurozone will either craft a comprehensive rescue or else let some of its wayward sheep wander off the monetary reservation and devalue their way back to sustainable growth.

That seems awfully optimistic, even to someone like me who believes Europe will inevitably muddle through. The ECB's efforts to stare down speculators on a debt default seem likely to be tested again, especially if next month's efforts to forge a comprehensive stability pact falter.

Banco Santander (NYSE: STD) shares were among the market's leaders Wednesday, alongside Banco Bilbao Vizcaya Argentaria (NYSE: BBVA) and Deutsche Bank (NYSE: DB). No less an authority than Jim Jubak makes a convincing case that the big internationally diversified Spanish banks will emerge from the crisis stronger.

But I can't help to wonder whether there will be a better buying opportunity next month, as Germans demand that Europe follow their lead or borrow without their support.

Disclosure: None

Source: An Opportunity in European Banks? There Might Be a Better One Coming