Outcome of Brussels Summit: Europe Takes Step Closer to Economic Government

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Wolfgang Franz, the head of the German Council of Economic Experts, would like to have seen more energetic steps taken. He is critical of the fact that the repurchase program imposes a burden of only €12.6 billion on private investors. "A bigger step would have been needed here to reduce the debt ratio," he says.

"This hardly changes anything for Greece," says Henrik Enderlein, a professor at the Berlin-based Hertie School of Governance, a private educational institution in Berlin. "The country is completely insolvent, but the banks are getting a break."

Bundesbank president Jens Weidmann, who was until recently one of Merkel's top advisers, even sees the euro zone on its way "to the communitization of risks in the case of unsound state finances."

The mood is also divided in the German parliament, the Bundestag. When it votes on the bailout package this fall, Merkel will hardly be certain of having a majority to support her. Her coalition partner, the business-friendly Free Democratic Party (FDP), is particularly unhappy with the resolution. It is adamantly opposed to the bailout fund being permitted to buy bonds on the secondary market.

'Castration of the Bundestag'

Last week, Finance Minister Schäuble was in constant contact with leading FDP politicians to make his case for the controversial legislation. Otto Fricke, a senior FDP politician, is optimistic that a majority will support the package in the Bundestag. "The EFSF can only operate on the secondary market within narrow constraints," he says. "Besides, we achieved a lot in terms of the participation of the private sector."

Others disagree. "The castration of the German Bundestag through resolutions at the European level is being continued," says FDP politician and untiring euroskeptic Frank Schäffler.

Merkel is also encountering opposition from her own party. "This package doesn't help Greece any further. People are already asking about bailout package number three," says Klaus-Peter Willsch, a budgetary expert with Merkel's center-right Christian Democratic Union (CDU). He criticizes the EFSF's ability to buy the bonds of crisis-stricken countries directly. "This arrangement comes dangerously close to euro bonds," he says.

The conservative Christian Social Union (CSU), the CDU's Bavarian sister party, instructed its chairman, Horst Seehofer, to support the chancellor's position. But skepticism abounded at last Thursday's meeting of the party's state organization, at Banz Castle in Bavaria. In the closed-door meeting, Interior Minister Hans-Peter Friedrich questioned whether the Greeks should remain in the euro zone, arguing that without the euro they could devalue their new currency and become more competitive as a result.

Even if Merkel does not gain a majority within her coalition for the vote, the Bundestag will still approve the bailout package -- with the help of the opposition center-left Social Democratic Party. SPD Chairman Sigmar Gabriel calls it a "big step forward," but he is also critical. "We could have had all this months ago, and it would have saved billions."

Gabriel calls it a "failure" that there will still be no financial market transaction tax "despite the fact that there is now substantial support for it at the European level." He added, however, that "this outcome is a huge step on the whole, which is why we will not oppose it in the Bundestag and will in fact vote for it."

On Thursday, there was also criticism coming from European Commission President Jose Manuel Barroso, who said: "We should have adopted these resolutions earlier." Barroso's words were directed toward Merkel, who had long opposed new powers for the EFSF and, as a result, was accused of a lack of solidarity.

Yearning for Grand Words

In recent months, Merkel has had to cause a lot of trouble -- and abandon many positions. Merkel does not deny the latter charge. But she insists that she helped countries like Greece and Spain introduce reform programs with her opposition to quick and comprehensive solidarity. Merkel was always concerned that Germany would keep on paying for countries like Greece, while they would simply continue spending and do nothing to make themselves more competitive.

Addressing the issue at a national press conference last Friday, Merkel said that, in light of the rapid gains being made by emerging economies, "we cannot rest on our laurels." She also said: "Solidarity must be tied to conditions." This is roughly her program for Europe, which is much too small, and yet these two elements are correct.

At the end of this stage of the battle, the yearning remains for more momentous words rather than just Merkel's typical rhetoric. "After tackling the acute crisis, we have to come up with a common language again for why Europe is important," says German Minister of Education and Research Annette Schavan, who is also the deputy head of the CDU. "Merely making reference to the desire for peace in Europe, which influenced the generation of (former Chancellor) Helmut Kohl, is no longer enough."

REPORTED BY CHRISTOPH HICKMANN, DIRK KURBJUWEIT, PETER MÜLLER, CHRISTIAN REIERMANN, CHRISTOPH SCHULT, ANNE SEITH

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• Part 1: Europe Takes Step Closer to Economic Government
• Part 2: A European Version of the IMF
• Part 3: 'This Hardly Changes Anything'