What is a Government Bond?

Quite simply

“It is the ability to print one’s own currency to pay government bond investors back under any circumstances that makes a government bond a government bond, i.e. a (credit) risk- free asset for hold-to-maturity investors,” Elga Bartsch, the chief European economist at Morgan Stanley in London, said in a report this month to clients.

I believe this is as good as any definition.

And, therefore, following comments highlight why the Euro-17 will continue to see their credit-worthiness eroded: 

European Central Bank President Mario Draghi damped expectations that the bank will step up bond purchases to tame the sovereign debt crisis, saying it can’t overstep its mandate.

“People have to accept that we have to, and always will, act in accordance with our mandate and within our legal foundations,” Draghi told the Financial Times in an interview, confirmed by the Frankfurt-based ECB. “The important thing is to restore the trust of the people -- citizens as well as investors -- in our continent. We won’t achieve that by destroying the credibility of the ECB.”

http://www.bloomberg.com/news/2011-12-18/draghi-tells-financial-times-bond-buying-unlikely-as-ecb-abides-by-mandate.html

As oft repeated, the ECB is NOT the Federal Reserve and - to the chagrin of the French - its NOT the Bank of England either.

That's the (terminal) dilemma that must be solved.