Merkel's intervention in the French elections yesterday - effectively attacking Hollande by stating that there will be no renegotiation of the Fiscal Stability Treaty - strikes me as bizarre. If she's hoping that this will discredit Hollande and lead to voters voting Sarkozy, I can't see how it will work (will those who voted for the far-right be more willing to vote for the candidate closest to German policy, or the candidate who is almost setting himself up as the leader of an anti-German leadership alliance?).
It's also starting to seem a bit desperate. Hollande's position isn't really so radical: no renegotiation of the treaty itself, but some new measures before it will be adopted. Since 90% the treaty is already EU law, Merkel's discipline provisions are in reality safe from Hollande. Even the Eurobonds Hollande is proposing aren't connected to mutualising debt, but for investment in infrastructure, etc. Calls for the remit of the ECB to also have encouraging growth and employment as part of its task will find a lot of sympathy in other states too. Is Merkel really going to set her face against all of this?
The Eurozone crisis is worsening day by day and the same austerity approach isn't working for anyone (even in Ireland there is talk that a second bailout might be needed - indeed, the Yes side in favour of the Fiscal Stability Treaty relies on this need for access to bailout funds to gain support for the treaty). While economic reforms are necessary, this extreme austerity is an insane way of going about it. The German government wants its fellow Eurozone states in a strange limbo of danger, where there is enough stability that the reforms can be implemented, but sufficient economic danger to ensure governments will enact these reforms.
While the German government may think it's the only way bailout states won't flush money down the drain, the political logic doesn't - and cannot - add up. The lack of a solution simply worsens the situation and spreads the crisis to yet more Eurozone states, while draining away the political support for the Euro in general, leaving people cynical that any of this mystic summitry the European Council engages in is a waste of time. All pain, no gain.
For Merkel to refuse even Hollande's modest proposals would be disastrous. The political winds are starting to blow against austerity, and Germany's great adapter will have a very tumultuous EU on her hands if she decides she won't give an inch.