While the waiting journalists in the press room of the European Council building in Brussels watched the Euro 2012 semi-final between Germany and Italy, Chancellor Angela Merkel had little time to cheer on the German team.
Until well into the night, the proposals and demands of the various European leaders clashed with one another. Italian Prime Minister Mario Monti demanded that the European Central Bank or the European bailout fund buy up Italian government bonds to lower the interest burden on Italy. After all, he argued, Italy is currently making its fiscal reforms, and so should not be punished.
Spanish Prime Minister Mariano Rajoy made a similar plea for his own country, while French President Francois Hollande called for short-term measures to be put in place, and demanded "solidarity" from Germany.
German member of the European Parliament (MEP), Markus Ferber, euro bailout expert for the conservative Christian Social Union (CSU), is skeptical of this call for solidarity. "In Europe things are always dressed up in pretty words," he told DW. "The new magic word is 'solidarity.' But solidarity should not be a one-way street. In the European Parliament, this word is supposed to be the cue for community loan mechanisms - or eurobonds. This debt repayment fund is suddenly very popular."
"But these are all concepts that require a completely different structure to the European Union," he added. "They can only come at the end of the road, and this summit will not be the end of the road - but the first small step at the beginning."
Merkel raised the issue of restructuring the EU so it becomes more of a real political union, while German diplomats said that Spain and Italy were just stoking panic, and that the current bailout funds and financing mechanisms could still be used.
Economist Janis Emmanouilidis rejects the idea of handing out short-term eurobonds. "That can't be done in the short-term, but I think that in the mid- to long-term, it will come to some kind of communalization of debts on a European level," he said. "But I think that the proposals being made now won't be put in place. And the size will be much smaller, too."
But Emmanouilidis, researcher at the Brussels-based Bruegel think tank, believes that only the new debts will be communalized - in other words, Germany will continue to reject calls to guarantee huge old debts.
Finnish bond certificates
The Finnish minister of European Affairs Alexander Stubb reported that Finland had suggested a compromise at the meeting - ailing countries should give out government bonds backed by the entire net worth of the state itself. With this increased security, the interest rate should be lower for the investor, he argued.
Essentially, this would mean that indebted states would be mortgaging their property. If they can't do that, then the European bailout fund would provide security as a community facility. Stubb said that Finland had successfully raised cash this way, and he argued that such certificates could provide a good mix of national responsibility and communal guarantees.
Meanwhile, Emmanouilidis is convinced that a good master plan for a restructuring of the eurozone will have a calming effect on the financial markets. In the short-term, though, he believes the European Central Bank will have to jump in and buy bonds.
"If you can credibly reassure the markets that you have taken this path, and if you show what the end result will be, then that will surely lead to a calming of the markets," he argued. "
Only the Netherlands now shares Merkel's uncompromising attitude. Even Austrian Chancellor Werner Faymann said he would be prepared to agree to a debt repayment fund - an idea rejected by Germany. And Belgium and Luxembourg are also now calling for short-term financial "fire-fighting" to ease the pressure on Spain and Italy.
There is clearly a deep gulf between the positions of Merkel and France's Hollande. Although Hollande was able to portray the growth pact as his victory, he won't back down on the eurobonds. "We underestimated Hollande," admitted one German diplomat in Brussels. "We thought he'd back down after the election."
But as long as Germany and France remain at loggerheads, there will be little progress in the eurozone, as Monti admitted. "Agreement between Germany and France is a precondition for success, but not enough on its own," he remarked.
Markus Ferber, CSU deputy and financial expert in the European Parliament, backs the chancellor in her struggles with the indebted nations. "It's not about quickly giving them cheap money and reducing the pressure to reform," he said. "That would be the wrong signal."
Merkel - the football fan - had to miss Germany's soccer defeat in the Euros. But when it comes to the euro, the single currency, she is still holding her course despite considerable resistance. Monti even bleakly raised the possibility that the euro would soon end, though he said he was prepared to stay in Brussels and continue negotiations until Sunday - when Italy plays in the European final.
Author: Bernd Riegert / bk, jlw
Editor: Neil King