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Merkel's stance was the cue for much huffing and puffing on all sides, before the latest brand of European fudge was concocted. The euro area will step in to help Greece, if required – but it will do so alongside the IMF, much to the consternation of the ECB and other central banks. The Bundesbank, the German central bank, even published a piece in the past week saying that, institutionally, the IMF should not be allowed to help Greece. Clearly it hadn't been talking to Chancellor Merkel either.

What we have ended up with, eventually, is a clear commitment from the euro area to help Greece if it cannot raise funds from financial markets, which should ease the pressure on the Greek government. But, quite apart from the poor Greeks who are still facing severe fiscal pain and a deeper recession as a consequence, Europe has not come out of this well.

First, the European Commission has again been exposed as a glorified bureaucracy – a civil service that EU leaders tolerate at best, and simply ignore when something that they really care about crops up. EC President Barroso, and Economic Commissioner Rehn, have run around saying all sorts of things. But, ultimately, they have no real authority. EU leaders still hold the reins of power in Europe – and while they may let the Commission play to its heart's content with issues they don't care about much, when push comes to shove on things that matter, the Commission is at best a bystander. Of course, we really knew this already – the Commission's pitiful progress in implementing the services directive is a clear testament to its impotence.


The ECB, meanwhile, scored a spectacular own goal. It was arguably the ECB's insistence that it would demand higher-quality collateral in its operations from next year that triggered the recent Greek crisis in December. Euro area banks were worried that, under the new rules, their Greek bonds would no longer be usable, and sold them off. After insisting, time and time again, that it would not change its mind, the ECB finally performed the mother of all U-turns in the past week, and said that it wouldn't demand higher-quality assets after all. And the ECB is left with far more than just egg on its face – if it had made its U-turn back in December, when people questioned the wisdom of its stance, things could have turned out rather differently.

Finally, the crisis has done nothing to dispel the view that Europe is still not able to deal coherently with the US or China. Apart from the obvious flaws in the Lisbon Treaty, outsiders will view recent events as another set of squabbles among EU members, with an eventual compromise that should have been reached a long time ago. One of the arguments for the appointment of Van Rompuy (and the UK's Ashton) was to let Europe speak with a single voice – answering Kissinger's famous question of who the US President should call if he wants to talk to Europe. The recent crisis, at least, has probably provided an answer. Obama should call Angela Merkel.

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