In sheer mathematical terms, it looks like an emphatic victory. On Sep. 29, the Bundestag Germany's Parliament voted overwhelmingly to approve expanded powers for the European Union's bailout fund. The final tally showed 523 members of parliament voted in favor of the measure and 85 against, with three members abstaining.
But the result belies a fragile consensus within German politics. Behind the scenes, Chancellor Angela Merkel worked furiously to keep her party in line and hold her coalition together. And more dangerously for the embattled euro zone, the vote was just one of many hurdles that will crop up over the next few months before policy makers can say with confidence that they've squelched Europe's raging debt crisis.
The vote is still hugely significant. Germany is Europe's de facto paymaster, and the bill's passage is an essential step to boost the size and scope of the bailout fund, known as the European Financial Stability Facility (EFSF). The agreement raises the fund's capacity from its current €250 billion ($338 billion) to €440 billion ($600 billion). Of this, Germany's commitments will rise from €120 billion ($163 billion) to €211 billion ($288 billion). The deal also hands the EFSF new powers, like the authority to buy bonds of struggling countries and indirectly bail out overexposed banks that run into trouble.
The ongoing crisis has strained German solidarity with its European neighbors. The popular view of debt-laden countries like Greece, Portugal and Ireland is that they are feckless, reckless and lazy. Merkel has struggled to dispel such notions, which have grown within her own center-right coalition of conservative Christian Democrats (CDU/CSU) and liberal Free Democrats (FDP). While the opposition Social Democrats (SPD) and the Greens in the Bundestag backed the accord on the bailout fund, observers said Merkel's political authority would have been under threat had it been rejected by more than 19 of her coalition members.
In the end, furious arm-twisting ensured that only 15 coalition parliamentarians voted against the deal, prompting a beaming Merkel to proclaim that the result proved Germany's determination to save the euro. Foreign Minister Guido Westerwelle echoed Merkel, saying that with the vote "the signal to our European partners is that you can rely on Germany."
However, the fund needs to secure approval in all 17 euro zone countries, and Germany is only the 11th to have authorized the changes. Nor is the Bundestag the toughest test. Having suffered grueling, self-imposed economic reforms, Slovakia is even more hostile to the idea of bailing out euro-zone members like Greece. The Slovak parliament's Oct. 17 vote promises to be another stern test of European unity.
Even more obstacles lie beyond these votes. The new rules for the bailout fund were only agreed on by euro zone leaders last July, but they already seem outdated. The recent buffeting of markets in Italy and Spain shows that a much heftier rescue mechanism is needed: under the new arrangements, the fund would simply be too small to bail them out. "The German vote was necessary, but Europe should go well beyond this agreement," says Zsolt Darvas, a research fellow with Bruegel, a Brussels-based economic think tank. "Banks are fragile, Italy is at risk and the euro zone is on the brink of a confidence crisis, even though its aggregate fiscal position is much better than that of the U.S."
Hence the talk of other "big bang" measures, like leveraging the fund by allowing it to borrow heavily against its assets, thus increasing its impact by as much as €2 trillion. Other suggestions include allowing Greece to default on half of its debt, and recapitalizing over-exposed banks. In the run-up to the German vote, politicians poured water on such notions, with both Merkel and Finance Minister Wolfgang Schäuble explicitly rejecting them. But with E.U. officials already dismissing the German vote as yesterday's war, they are sure to resurface soon.
Nor is the drama over in Greece. As German MPs were voting, a team of inspectors from the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) were due back in Athens to see if the government has done enough to warrant another chunk of loans. They were greeted by protests by public workers, who blocked entrances to a number of ministries as they railed against the government's harsh austerity measures.
The crisis has thrown up epic squabbles across Europe, but the euro zone's capacity to respond remains juddery. And as the Bundestag vote shows proposed action takes time to wind its way through the various legislatures. If a "big bang" plan does emerge, it will face the same rigmarole, under even tighter political conditions. But this is to be expected, says Jacob Funk Kirkegaard, a research fellow at the Washington-based Peterson Institute for International Economics (PIIE). "There will be another huge political debate, including more votes in the 17 euro zone parliaments, but this is inevitable because of Europe's weak institutionalization," he says. "That is something we have to live with because it goes back to democratic legitimacy."
Angela Merkel might have heaved a huge sigh of relief after Thursday's vote, but the challenges ahead economically and democratically are still piling up.