BERLIN Angela Merkel lifted a weight from Europe's shoulders by agreeing to a new Greek bailout, but Germans may feel her apparent victory in making bank contribute is outweighed by having ceded more power to Brussels.
The German chancellor had sparked a euro sell-off two days before Thursday's crisis summit by warning the outcome would not be "spectacular" -- the kind of prudence that has given her a reputation for dragging her feet on Europe's debt woes.
In the event, her pre-summit huddle with France's Nicolas Sarkozy and the head of the European Central Bank enabled a far-reaching deal. While it is likely to trigger the euro zone's first sovereign default, it also provides new powers to stop contagion spreading to bigger economies like Italy.
Some of her conservative German constituents hailed France's acceptance of Merkel's insistence that private creditors share the cost of a second Greek bailout as "a formidable success."
"In terms of what was expected in recent days, the summit is a pleasant surprise," said conservative daily Die Welt. But it went on to say that "actually the glass is half empty" as the summit's effectiveness at stopping contagion was "questionable."
The Financial Times Deutschland took a similar line, saying Merkel had scored a success by getting the French to accept that private creditors should contribute, but noting that Greece's debt problems were far from over.
"NO TRANSFER UNION"
Merkel had come under huge pressure to reach a deal after being reticent about whether she would even attend the summit unless she was satisfied with the likely outcome.
Her political mentor in the Christian Democrats (CDU), ex-chancellor Helmut Kohl, was quoted last weekend as accusing her of "ruining my Europe," though he denied saying this.
Senior CDU lawmaker Kurt Lauk urged the government to "go on the offensive," and the International Monetary Fund and White House both encouraged European leaders to act decisively. U.S. President Barack Obama telephoned Merkel personally to drive home the message.
Amid all the relief at the summit's promise of 109 billion euros of new aid and a contribution by private creditors, Merkel seemed to grasp immediately that the German public would ask questions about how much she had ceded in the compromise.
She said back in Berlin she was convinced Europe would not now become a permanent "transfer union," where rich states like Germany are responsible for the debt of poorer ones like Greece.
But some German politicians believe that letting the current bailout fund -- the European Financial Stability Facility -- act in a pre-emptive manner and buy the debts of troubled states on the secondary market increases just such a risk.
In the Bundestag (lower house of parliament) there has been heated debate within Merkel's coalition about how to ensure that the EFSF and its permanent successor from mid-2013, the European Stability Mechanism (ESM), are only activated as a last resort.
With Sarkozy talking happy of the EFSF being "the beginnings of a European Monetary Fund," and French Budget Minister Valerie Pecresse saying "we are doing more European integration, which the Germans did not want," Merkel risks looking like the loser.
PRESSURE WILL BUILD
German conservatives attempted to head off such criticism. Deputy chancellor Philipp Roesler, economy minister and head of the Free Democrats (FDP) who fret about a transfer union, said the EFSF would only buy bonds "within tight boundaries."
"All additional guarantees, every potential additional euro leaving (Germany's) budget, must go through parliament," Otto Fricke, the FDP's top budget expert, told Reuters Television.
The conservative European affairs chief in the Bundestag, Michael Stuebgen, said MPs' objections to the EFSF buying bonds had been overruled with "a commitment to only do this in the last resort and with consensus."
Conservative support was ensured by strong private-sector involvement, he said. Crucially for Germany, too, France dropped its proposal of a tax on banks to finance the Greek bailout.
But bankers acknowledged privately that their contribution, estimated at up to 50 billion euros by mid-2014, was being made out to look more substantial than it is for political reasons.
"Publicly the banks will say that 21 percent (haircut) is quite tough, to satisfy the politicians, but they do all know that they can cope with 21 percent," one banking source said.
Merkel said the Bundestag would get its say on the changes to the EFSF in September -- when it will also hold a binding vote on the ESM, and when the German constitutional court should
rule on the legality of the first Greek bailout and the EFSF.
"These new decisions will make opposition grow within the coalition to this line of European policy," said FDP member of parliament Frank Schaeffler, the loudest critic of the bailouts.
He hopes that a large chunk of conservative rebels will vote against the ESM, but Merkel knows she can count on the votes of the pro-euro opposition Social Democrats if necessary to get it passed. Conservative backbench revolts have fizzled so far.
Merkel biographer Gerd Langguth said the chancellor, who is expected to seek reelection in 2013, was unlikely to gain politically from the euro deal because "it is so complicated that nobody understands who was the victor, Merkel or Sarkozy."
With German enthusiasm for the euro waning and Merkel making it plain she is "not a European at heart," Langguth said -- despite her insistence on Friday that she was "passionate" about the EU -- the summit is unlikely to cure her euro zone headache.
"I think, generally, the pressure will continue," said Langguth.
Our top photos from the last 24 hours.