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Germany is back in the driving seat – and Merkel’s back in charge of her coalition

The Bundestag’s substantial vote in favour of the EFSF puts an end to months of ‘aussitzen’ – sitting on the sidelines – in Berlin

There was a palpable sense of relief in Brussels that the German chancellor, Angela Merkel, had defied her critics and won a clear majority for giving the eurozone’s bailout fund, the European Financial Stability Facility (EFSF), enhanced powers.

But thoughts immediately turned to what comes next: how does Berlin envisage “son of EFSF”, given that a new, even more enhanced version is required? And can it be agreed, even in outline, by the Cannes G20 summit in five weeks’ time?

The only country that matters in that perspective, pace Nicolas Sarkozy, is Germany. That’s why Merkel’s “double majority” was so vital: it reasserts German ownership and leadership of the euro project and, crucially for her, buttresses her own leadership after months of aussitzen (sitting it out).

The chancellor won a huge simple majority of 523 votes to 85, because the Social Democrats and Greens, her opponents, backed the EFSF and went further in embracing eurobonds. (Whether they’ll do that in the 2013 general election campaign is another matter.)

But she also narrowly won the so-called “chancellor majority”, by gaining 315 votes from the combined members of her coalition’s parliamentary parties, the Christian Democrats (CDU) and Free Democrats (FDP). That was four more than she needed to sustain her authority, as the number of dissidents who had signalled their opposition earlier this week halved.

It was never really on the cards that she would lose that majority. Her own CDU, at mid-term, is haemorrhaging popular support and losing power in Länder, or state, parliaments, while the FDP, on current polling, would be out of the Bundestag altogether. So there’s no desire to force a vote of no confidence – let alone a general election – within their depressed ranks.

The question now is whether Merkel and Wolfgang Schäuble, her finance minister, can muster support for the new plans being hatched in Berlin, Brussels and other eurozone capitals. These are highly sensitive given the volatile nature of markets – so much so that they’re in the form of “non-papers” so far.

But at least three options are being considered, including turning the EFSF into a bank that could use European Central Bank funds as collateral for its loans or into an insurance scheme for orderly defaults.

There’s considerable scepticism whether these ideas can be turned into a fully fledged scheme by the Cannes deadline set by Tim Geithner and George Osborne, the two outsiders. But there is undoubtedly a sense of urgency.

Meanwhile, there’s just the outstanding little matter of getting the Slovak parliament to approve the EFSF. It’s not due to vote until 25 October, or a week or so after the next EU summit, so pressure is on the government and opposition in Bratislava to cut a deal before then.

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