SOONER than one might have expected, Franc ois Hollande's election has shifted the tactical balance in euro-zone politics away from Berlin. The new French president has rallied Italy and Spain behind his proposals for a "stability pact" - which challenges certain German preferences - ahead of the European Council summit. At the same time, Berlin is strengthening its rhetorical defence against calls to take on more of the euro zone's collective economic burden.
Chancellor Angela Merkel has again made clear her country cannot carry the whole euro zone on its shoulders. The vast majority in Germany argue Berlin has already staked a huge amount on its euro partners. This is true, even though two rescues were designed to bail out German investors in Spanish and Irish banks at the expense of those nations' taxpayers.
Merkel has again signalled that Germany is willing to go very far in pooling national liabilities on the condition of a concomitant pooling of sovereignty, a "political union". Germans say this is not something others are willing to do. Hollande's proposal - sensible steps towards a banking union - may be aimed at calling the German bluff. He wants to give the European Central Bank the power to wind up leading banks. This would be a serious ceding of sovereignty, as it would weaken the power of governments to lean on banking systems to favour sectors or buy sovereign debt.
Hollande also wants the new euro-zone rescue fund - the European Stability Mechanism - to provide equity directly to banks, so that the risk of bank recapitalisation would be shared across the union.
Hollande's stability pact falls far short of the sovereignty sharing that Berlin says its wants. But then, Berlin may want too much. It is reasonable to make euro-zone bonds wait for common control of deficits. There is no need to impose from the outside the exact composition of public spending or the choice between a high-tax, high-spending model and its opposite.
While the rhetorical skirmish plays out between Paris and Berlin, the UK is breaking new ground in an effort to reignite growth. All countries in or out of the euro must shed the constraints of conventional thinking. London, June 15