The question has puzzled leaders ranging from Henry Kissinger, said to
have once asked who he should call to reach Europe, to Barack Obama. It
has become all the more pertinent as the European Union tries to fill
what is widely viewed as a leadership vacuum during the euro zone’s
sovereign debt crisis.

Two leaders are formally representing
the EU at the G20 summit this weekend, EU President Herman Van Rompuy
and European Commission President Jose Manuel Barroso.

But the
U.S. president called neither of them when he wanted to get his message
across to the EU at the height of the crisis in May. Instead, he called
German Chancellor Angela Merkel and French President Nicolas Sarkozy.

That
underlined how the balance of power is shaping up since the start of
the crisis and following an institutional shake-up under the Lisbon
treaty that went into force in December.

In the reshaped
political landscape, power is divided between the executive European
Commission and the European Council — as well as the European
Parliament — but they are heavily dependent on France and Germany
shaping decisions.

“If you look at the performance of the
European leadership and system since the start of the euro zone crisis,
there’s no way you can give them full marks,” said Thomas Klau, an
analyst at the European Council on Foreign Relations think tank.

“But
the crisis has showcased the importance of the Franco-German couple. In
most cases a Franco-German agreement is what becomes the template for a
European agreement.”

Setting
the agenda

Time and again in the crisis, Merkel and
Sarkozy have held bilateral talks during EU summits or just before them
that shaped the agreements reached by the entire 27-country bloc.

In
the most recent example, decisions they took at talks in Berlin on June
14 paved the way to agreement at a Brussels summit three days later on
the broad outlines of plans to tighten budget rules and reinforce
economic policy coordination.

Sarkozy accepted that moves to
closer policy coordination should involve all 27 EU member states and
not just the 16 that use the euro, and dropped demands for a dedicated
euro zone secretariat which Berlin opposed.

This highlighted
how Germany now dominates the relationship and the EU as a whole.

“It’s
clear that when it comes to a response to the euro zone crisis, Germany
is managing to stamp its view on the others,” said Simon Tilford, chief
economist at the Centre for European Reform think tank in London.

This
leadership role comes with responsibilities. As Europe’s largest
economy, Berlin is the biggest contributor to the euro zone’s 750
billion euro ($920 billion) financial safety net for countries
struggling in the debt crisis.

It is not a role Germany is
entirely comfortable with, especially as many Germans oppose bailing out
more profligate member states and Merkel, whose popularity has sunk, is
widely seen as more focused on internal matters than before.

The
French are also uneasy about the relationship and what they regard as a
“creeping unilateralism” on the Germans’ part, but they have little
choice but to cooperate, diplomats say.

“The German-French
tandem is not working properly but there is just no other option,” said
Janis Emmanouilidis of the European Policy Centre think tank.

Speaking with one voice

The
European Commission and the European Council, the institution which
represents all the member states and is headed by Van Rompuy, are also
doing their best to show solidarity.

The Commission is working
closely with the French and the Germans, as well as with the Council, to
come up with proposals for containing the crisis which began in Greece
and has threatened to spread to other euro zone countries.

Commission
officials say many of their proposals have been adopted by the member
states and that cooperation is good. But relations with France and
especially Germany have been strained at times, with Berlin and Brussels
trading open jibes.

Van Rompuy has found his own niche, taking
charge of a task force overseeing moves to tighten budget discipline
and economic policy cooperation to prevent further crises.

He
has helped smooth relations between Sarkozy and Merkel, diplomats say,
and fills a gap left by a decline in the influence of Luxembourg Prime
Minister Jean-Claude Juncker, who chairs meeting of euro zone finance
ministers.

He has a further chance to strengthen his position
when Belgium takes over the EU presidency on July 1. Belgium is expected
to run a smooth presidency, but it may not have a coalition government
for weeks following an election on June 13.

The EU leaders
appear to have learnt lessons from the errors they made at the start of
the crisis when their action — or lack of it — was widely seen as a
sign of weakness and some of their comments heightened alarm on
financial markets.

“The good news is that even this confused
and ill-advised bunch was eventually forced to come together and approve
unprecedented measures to rescue the euro from disaster,” the Brussels
Centre for European Policy Studies think tank said.

Agreement
on the safety net, and a 110 billion euro support package for Greece,
has helped ease markets’ concerns but traders still have long-term
worries that the austerity moves being announced across Europe will
stymie growth.

Obama has expressed such concerns — and been
rebuffed by EU European leaders. But analysts see a danger of a new
recession in Europe if it fails to tackle imbalances between stronger
performing countries such as Germany and weaker states.

“Unless
they address the underlying issues, there could be defaults and
recession,” Tilford said.

For more on the EU, double-click on
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(Editing by Andrew Roche)