There is little doubt left that Merkel is a shrewd politician, who has walked a very thin line for the past three years letting the international community understand that Germany is ready to defend the euro while letting her constituents at home understand that Germany is not going to give anything away.
It was three against one and there was Lagarde in the background making headlines with her support of a eurobond and a eurozone banking union. In a step that would require a rule change, the leaders also argued international aid could go directly to banks, rather than governments, which would add to government debt, precisely the problem that originally dragged Europe into this mess.
Merkel said no and she had a point. The bailout funds should not to go banks, she said, because Germany and, by extension, any other country supplying rescue funds, would not have any control of how the rescue funds were used.
Imagine a treaty in Europe that allows Germany to tell Spanish banks how to invest or how much capital to raise. It seems unlikely Spain would agree to such a deal, let alone Germany.
Of course, such a deal is also on the table. The formation of a banking union would include giving more regulatory power to the European Central Bank and diminish the role of the European Banking Authority, which was put together in 2010 and is rarely in a sentence that doesn't also include the word toothless.
It has to be said Europe still has several major banks that are owned by taxpayers, which puts a different spin on what the international community might have to say on the matter. Lending directly to banks where governments are major shareholder is, in point of fact, a loan that goes to the government.
When the lame duck George Bush administration in Washington put together its Troubled Asset Relief Program former Treasury Secretary Henry Paulson Jr., the program's principal designer left out several control mechanisms that were in discussion at the time. TARP loans did not include any mandate on lending restrictions, which desperately needed loosening at the time. It did not demand banks trim their lavish compensation packages to multimillionaire executives, which included many examples of rich men teetering seriously close to being filthy rich men.
Some accused Paulson, the former chief executive officer of Goldman Sachs of pure cronyism. The TARP bailout was practically a blank check, a no-strings-attached bonus for bankers who had helped put the economy in the deepest hole it had been in since the Great Depression.
Only banks that received special treatment, which is to say a second bailout, were required to restrict pay on its top executives.
But did banks treat this as if money were falling out of the sky? Absolutely not. As public companies, executives understood that having $25 billion of taxpayer money tucked away in conservative investments was a serious stain on their reputations.
The big U.S. banks receiving TARP funds did not increase lending to small businesses or to anyone else, as it happens. But they did raise an enormous amount of capital when instructed to do so by the U.S. Federal Reserve after the first round of so-called "stress tests."
For U.S. banks, the stigma of having government funds on their books was incentive enough to make raising capital their highest priority. In the meantime, some very big banks were swallowed up by some even larger banks, such as Merrill Lynch, Wachovia and Washington Mutual, which were bought, respectively, by Bank of America, Wells Fargo & Co. and JPMorgan Chase.
Maybe Merkel missed the lessons TARP provided. It was not a fault-proof system. Some regional banks are still trying to figure out how to pay back government loans.
But the lesson is clear: Private companies will pay back loans very quickly, because, unlike governments, they can go under for financial reasons alone.
While Greece, for example, is now looking to extend its loan, almost every major U.S. bank paid off their loans way ahead of schedule. General Motors was not far behind.
Often for private companies, a bailout is punishment enough.
In international markets Monday, the Nikkei 225 index in Japan fell 0.72 percent while the Shanghai composite index in China dropped 1.63 percent. The Hang Seng index in Hong Kong shed 0.51 percent while the Sensex in India fell 0.53 percent.
The S&P/ASX 200 in Australia lost 0.5 percent.
In midday trading in Europe, the FTSE 100 index in Britain lost 1.06 percent while the DAX 30 in Germany shed 1.92 percent. The CAC 40 in France tumbled 2.28 percent while the Stoxx Europe 600 gave up 1.46 percent.
Don't panic, stocks will rebound