Can you always be right and everyone else always be wrong?

Obviously not, as the German Chancellor Angela Merkel learned from bitter experience during the night of June 28 into 29.

Facing a surprise rebellion from Mario Monti and Mariano Rajoy, she conceded crucial ground; she allowed the European Stability Mechanism (ESM) – that is the permanent European relief fund soon to be in place – to be able to capitalise Spanish banks directly and buy up Italian debt without requiring an austerity programme.

For Madrid - and perhaps Dublin, if the decision sets a precedent - this means that the bank bailout will not be entered into the state's balance sheets. For Rome - and perhaps Paris, widely touted as the next domino in line - it means that states can now finance themselves without being under market pressures that impose exorbitant interest rates. It’s just common sense, say most European leaders and observers.

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But for the German Chancellor, this nocturnal decision of the European Council is a double failure. On the one hand, for the first time since the crisis started, it is not Angela Merkel who is steering the discussion. Even if in the past, she did eventually say yes after originally saying no, she did it at her own pace, backed up by Nicolas Sarkozy. But today she seems to have lost the support of all the major European countries. Forced to concede – although it was a tactical concession – on the Growth Pact demanded by François Hollande, she had to give ground in these two strategic ways.

The consequence is that a breach has been opened wide in her line of defence against eurobonds. By declaring that she will refuse to budge on this issue "as long as she lives", she has given a pledge to her party and her constituents; but she now finds herself with her back to the wall, compelled to try and prove she is still right – or go back on her position.

After years of neglect in public spending and lack of control of public finances, history will tell if the discipline and supervision by the EU advocated by Berlin are the best answer to the crisis. But the fact remains: since the night of June 28 to 29, the balance of power in Europe has shifted.

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