Virginia Mayo
Germany is not opposed in principle to beefing up the euro zone crisis fund but would only agree to changes on its own terms, wary of a backlash from voters in seven state elections this year.
For Berlin, being cast as the European bully - accused of holding out on Greece and Ireland, rejecting calls for joint euro bonds and pushing Portugal to seek a bailout - is the price to pay for having the muscle to call the shots.
But while Germany has repeatedly rejected in public calls to extend the €440-billion European Financial Stability Facility, the government has been discussing the possibility with its partners behind the scenes.
This has led to divergent media reports around Europe over the intentions of Angela Merkel's centre-right government, which shoulders the biggest burden in the euro zone rescue schemes.
Hence the Financial Times' headline on Thursday was "Berlin backs wider fund role", while the Frankfurter Allgemeine Zeitung said "Merkel criticizes proposals to widen the euro rescue scheme," a line echoed by several other German newspapers.
German leaders have repeatedly stated that no extra funding is needed but also insist that the biggest economy in the bloc will "do what is necessary" to protect the euro.
On Wednesday evening, Finance Minister Wolfgang Schaeuble said the euro zone nations were working on a "comprehensive package" to solve the bloc's debt crisis.
In private, officials concede Berlin has studied the option of increasing the amount of money the EFSF can lend.
"I imagine some people here would be looking at it from a systemic point of view," says one official, quickly adding that it would pose major political problems in an election year.
Berlin's conditions for increasing the fund's effective lending capacity would likely include stricter commitments to structural economic reforms and budget deficit reductions, possibly backed by national laws or constitutional amendments along the lines of Germany's "debt brake".
Worries about the EFSF's capacity stem from the fact that a complex system of loan guarantees means its effective capacity is much lower than the €440-billion headline figure. Experts put the amount available at €250-billion to €260-billion.
Following better-than-expected debt auctions by Portugal and Spain this week, the conviction that no additional steps are necessary has strengthened again in some quarters.
"We don't see a need for further action now," Deputy Finance Minister Steffen Kampeter told Reuters.
While some EU officials talk of a policy split between Ms. Merkel and Mr. Schaeuble - both members of the Christian Democrats (CDU) - the ruling coalition shows a united front on Europe, and it is hard to find chinks in the German armour.
Ms. Merkel's popularity suffered after the Greek bailout last May, when taxpayers felt they had to pay for a decade of debt-fuelled growth elsewhere while German incomes stagnated.
Facing seven state polls in 2011, Ms. Merkel will want to avoid gambling away her recent recovery in opinion polls by backing a bigger euro bailout fund.
"The government has a hard time as it is justifying the steps already taken to support the euro zone, and if this takes on further dimensions then you can just wait for someone to complain to the German constitutional court again," said Timo Klein, a senior economist in Frankfurt for IHS Global Insight.
The Karlsruhe-based court will rule on the existing aid packages this year and Ms. Merkel must avoid increasing the risk of a negative decision that would stop Germany contributing and spark a crisis of confidence in the euro.
Mr. Klein said pushing countries like Portugal to tap aid just "increases the market's appetite to pressure more countries to do so," while German officials say setting a new ceiling for the EFSF would just encourage markets to push for even more.
For these reasons, Berlin sees enabling the EFSF to actually lend its full €440-billion as one possible step that might avoid provoking the court and worrying taxpayers.
Officials dispute suggestions that Mr. Schaeuble takes a more moderate view than Ms. Merkel on extending support to partners.
Differences in perception may arise from the fact that Mr. Schaeuble's ministry tends to examine policy on an EU level while Ms. Merkel's office focuses on the potential political impact.
The chancellor's advisors "look more at how you implement it at home and how to take the voters with you if you want it to go through parliament and Karlsruhe," said one Berlin official.
"It's not so much that the chancellery wants one thing at European level and the finance ministry wants something else."
This was also true of Germany's rejection of proposals for joint euro zone bonds to help strugglers like Ireland and Portugal get credit more cheaply than they would on their own.
Both Ms. Merkel and Mr. Schaeuble ruled out the idea repeatedly but talk persists that the minister is privately more amenable.
One official said Mr. Schaeuble was just "playing devil's advocate" by saying E-bonds were possible - if nations agreed to politically impossible conditions such as letting parliaments have a say in their EU neighbours' budgets.
The E-bond proposal was "legally almost impossible, politically very difficult, and constitutionally undoable without a big (EU) treaty change", said one German official.
Berlin is wary of proposals for the EFSF's replacement from 2013, the European Stability Mechanism, to buy government bonds on the secondary market, something the European Central Bank has done to the consternation of Bundesbank chief Axel Weber.
Germany would require strict governance and fiscal reform commitments in return for such concessions. Ideally, it would like its euro zone partners to imitate the German "debt brake" law which came into effect this year, forcing the country to cut the structural deficit to 0.35 per cent of gross domestic product by 2016.