Virginia Mayo, Associated Press
European Commission President Jose Manuel Barroso pauses before speaking during a media conference at EU headquarters in Brussels, on Wednesday, Nov. 23, 2011. The European Commission backed the introduction of jointly issued eurobonds, coupled with stricter budgetary discipline, as the best way out of a debt crisis that's threatening the 17-country eurozone.

BERLIN — Germany failed to raise as much money as it hoped in its latest bond auction, in a surprising sign that Europe's biggest economy may not be immune from a debt crisis raging across the continent

A fresh warning that France risks losing its top-notch credit rating and more verbal jousting between German Chancellor Angela Merkel and the EU's top executive arm also fueled concerns that the bloc is losing the battle to contain a debt crisis that's already seen three countries bailed out and is threatening much-bigger economies like Italy and Spain.

However, it was the unexpected news that Germany, Europe's biggest economy and the lynchpin of the bailouts, suffered one of its worst bond auctions ever that really caught the eye. The country's Financial Agency said its latest €6 billion ($8.1 billion) auction of 10-year bonds met with only 60 percent demand.

German officials cited a record-low yield and the extraordinarily nervous market environment for the auction's failure, but investors took it as a warning sign that the crisis might even cause trouble to rock-solid Germany.

"If Germany can't sell bonds, what is the rest of Europe going to do?," asked Benjamin Reitzes, an analyst at BMO Capital Markets.

The auction result sent the euro sliding, and by mid-afternoon it was trading 1.1 percent lower on the day at $1.3367.

Germany, the world's fourth-largest economy, is seen as the 17-nation eurozone's most stable pillar and its borrowing rates have been driven down in recent months by high demand from investors seeking shelter from the sprawling debt crisis.

That may partly explain why it suffered what many in the markets are describing as a "failed auction" — investors may be beginning to think twice about whether the returns on offer are appealing.

Offering only 1.98 percent, the auction's yield was the lowest-ever for Germany's ten-year bond. Germany offered an interest rate of up to 3.25 percent at previous auctions of 10-year-bonds this year.

Even so, analysts called the result worrying, though the German government stressed that its refinancing was not at risk. Having sold off only €3.9 billion, the agency retained the remainder, to be sold off another day.

"The result does not represent any refinancing squeeze for the emitter," the agency said.

Though Germany is widely-lauded as a model for other eurozone economies, its debt burden is relatively high, by historical standards at about 81 percent of GDP, so it continually has to tap bond market investors for fresh funds, so it won't want to get in the habit of having too many failed auctions.

One advantage Germany has over practically most European economies is that it's triple A credit rating is not at threat — unlike France's. Though France has seen the yield on its ten-year bond rise in recent days to around 3.65 percent, way ahead of Germany's equivalent 2 percent, it's still much lower than the near 7 percent rates that have provoked such turmoil in Italy of late.

On Wednesday, Fitch warned that Europe's second biggest economy is at risk of losing its cherished top-grade if Europe's leaders fail to stop the debt crisis from worsening because a "further intensification" would result in a much sharper economic downturn in France and the European Union. Fitch's warning came two days after another rating agency, Moody's, delivered a similar message.

And there were few signs Wednesday that Europe's leaders were pointing in the same direction.

German Chancellor Merkel and the European Union's executive arm clashed openly on the need to issue common bonds uniting the 17 euro nations — another sign that Europe is divided in dealing with its deepening debt crisis.

Jose Manuel Barroso, the head of the European Commission promoted the introduction of jointly issued eurobonds, coupled with stricter budgetary discipline, as the best way out of the debt crisis. Eurobonds, he said, "could bring tremendous benefits."

That's obviously not Merkel's view, who publicly poured cold water on the idea for the second day running — calling the Commission's push "troubling" and "inappropriate."

She told lawmakers in Berlin that it was wrong to suggest that a "collectivization of the debt would allow us to overcome the currency union's structural flaws."

Germany has long opposed the use of eurobonds, instead calling on profligate member states to clean up their finances which would eventually enable them to borrow at lower rates again.

Proponents of eurobonds argue that they would immediately ease refinancing for weaker eurozone nations. For Germany, though, a pooling of its strength with the weaker members, would most likely to lead to higher borrowing costs.

Instead, Merkel reiterated her call for changes to the EU treaties to guarantee strict enforcement of fiscal and budgetary discipline as "a first step toward a fiscal union."

The easiest way for Europe to counter its debt problems would be for its economies to grow, automatically lowering its debt ratios and generating more revenues. But that hope was dashed yet again as a pair of indicators showed the bloc's economy as being in deep trouble.

The sense of an impending recession was evident in the findings of a closely watched survey from financial information company Markit. Its monthly survey showed that the eurozone contracted for the third month running in November and that the deteriorating economic picture is not just confined to debt-stressed countries such as Greece.

The survey suggests that the eurozone would contract at a quarterly rate of 0.6 percent in the fourth quarter and that the problems are increasingly spreading to Europe's two biggest economies, Germany and France, Markit said.

Further grim news emerged with a shock announcement that eurozone industrial orders collapsed by a massive 6.4 percent in September from the previous month.

Official figures last week showed that the eurozone only narrowly avoided contracting in the third quarter, growing by only 0.2 percent during the period.

Geir Moulson in Berlin, Raf Casert in Brussels and Greg Keller in Paris contributed to this report.