Her stance was a blow to Spain's hopes of getting the cost of rescuing banks hit by the collapse of a real estate bubble off the state's balance sheet, and hence easing its debt burden without recourse to a euro zone bailout. It was also a setback for Ireland's hopes of shedding some of its bank-induced debt.

It remains to be seen whether Merkel's refusal to share such "legacy" costs is Germany's last word, or whether a future Berlin government may revisit the issue after the election.

Many economists believe that a fresh start for the euro zone will require action such as common euro zone bonds or at least a reduction in peripheral members' "legacy" debts to be viable in the long run. Early relief for Madrid appears ruled out, although Merkel said on Sunday Ireland was a "special case".

Yet German officials say relations between Merkel and Hollande are not as tense as they seem in public, and they are confident that he will accept trade-offs between greater European solidarity and more pooling of fiscal sovereignty.

Britain drifting away?

While the rest of Europe is negotiating intensively on closer integration, Britain is talking increasingly about loosening its ties with the EU, and some influential members of the governing Conservative party of leaving completely.

Prime Minister David Cameron has threatened to veto the seven-year EU budget due to be agreed at a Nov. 22-23 summit if spending is not cut. And he wants to exploit the negotiations on closer euro zone integration as an opportunity to negotiate looser membership terms for Britain in the Union.

It remains to be seen how far other European partners are prepared to accommodate British exceptionalism. Finland's Europe minister said last week that Britain seemed to be waving "bye, bye" to the EU, and there was little others could do about it.

The main achievement of the latest summit was to keep plans for a single European banking supervisor broadly on track despite a rearguard battle led by Germany's finance minister.

"I struggle to find any major piece of reform involving more than a couple of countries which has moved from idea to implementation as fast as the European banking union," said UniCredit global chief economist Erik Nielsen.

The most encouraging news for the future of the euro zone, Nielsen said, was the way that Germany's leadership has changed its attitude towards keeping Greece in the euro area, and hence supporting peripheral states in difficulty.

"There is no turning back now, not only because of the already clear signals from the government leadership, but because the political challenge (from the opposition Social Democrats) - impressively - turns out to be coming from a demand for more Europe, and more support for Greece," he said.