Amid Europe's intensifying debt crisis, a spat between banking authorities in Germany and Italy shows how Europe's carefully nourished financial ties are fraying.

The row kicked up last fall when German banking regulators ordered Italian bank UniCredit SpA to stop borrowing billions of euros from its German subsidiary. They wanted to protect their banking system from being infected by the weaker one to the south. The move angered Italy's central bankers and sent relations between financial authorities into a nose dive.

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