Leading article: Ms Merkel delivers, but the threat to the euro remains

Investors' loss of confidence has already spread alarmingly and threatens Spain and Italy


Although it is a matter of unqualified relief that the German parliament so comprehensively agreed to expand the eurozone bailout fund, yesterday's "yes" vote is but a single, small victory in a long and difficult campaign. That Germany's fractious politicians still do not seem to grasp that is of grave concern.

The Bundestag vote is of course a significant hurdle cleared. It is also a well-deserved fillip for Angela Merkel, who faces criticism abroad for her dilatory response to the euro crisis and ire at home for risking taxpayers' money to shore up the profligate Greeks. Given that three quarters of Germans do not support the plan to increase their contribution to the European Financial Stability Facility (EFSF), there was a real risk that the measures might not be passed at all. And if the government had failed to win a "Chancellor's majority", and been forced to rely on opposition support, it could have triggered a confidence vote. In the event, Ms Merkel won on both counts, and although the margin of her coalition's majority may have been a mere five votes, she nonetheless survives with her political credibility intact.

In fact, yesterday's vote is testament to Ms Merkel's considerable abilities. She has never been a grandstanding politician. Rather, her leadership has been characterised by a world-class talent for dealmaking. The value of such an approach should not be underestimated. The Grand Coalition that Ms Merkel led in her first term confounded sceptics' predictions, surviving for a full term thanks to her unbeatable skills at knitting together apparently irreconcilable positions. The recent frantic campaign to win grassroots support for the upgraded EFSF is just the latest example of her similar approach to the current centre-right coalition.

Ms Merkel's slowly-slowly response to the euro crisis follows the same pattern. In part, it plays to her instinctive caution. In part, it reflects the nigh-impossible political balancing act required to use Germany's economic might to save the eurozone while keeping the support of a German public spooked by the ghosts of hyperinflation into a hearty, even moralistic, distaste for debt.

If yesterday's Bundestag vote is, to some extent at least, a vindication for Ms Merkel, her failure to explain to the German electorate that letting Greece go will cost far more than saving it is still worthy of criticism. The case desperately needs to be made. While everyone outside Germany knows that even the upgraded EFSF is too small, the Bavarian section of Ms Merkel's Christian Democratic Union party was already making noises about no more bailouts yesterday. And Wolfgang Schäuble, the Finance Minister, branded speculation about further changes to the EFSF as "indecent", even as European officials were putting together sensible proposals to leverage the newly-expanded €440bn up to €1 trillion.

With a free hand, Ms Merkel could yet win through, building a consensus behind each individual step as required and gradually inching German public opinion around to support, or at least accept, all necessary measures. But there is no room to manoeuvre. Investors' catastrophic loss of confidence has already spread alarmingly and now threatens Spain and Italy, which between them hold €1.5 trillion worth of debt. Exposed banks are in increasing need of recapitalisation. And the next round of more radical rescue measures is, rightly, on the table, before the ink is even dry on Germany's ratification of the last ones. Yesterday was indeed a triumph for Ms Merkel. But she does not have the time to do the same again.

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