The ECB celebrations broke up in acrimony. Christine Lagarde, the head of the IMF and former French finance minister as well as a supporter of bringing in the ECB's big guns, left first with no comments to the waiting press. Next to sweep past the cameras and microphones without a word was Sarkozy, pale with rage and the strain of being a presidential father who had just missed his child's birth on a futile mission. Jose Manuel Barroso, the European Commission president; Herman Van Rompuy, the president of the European Council; and Olli Rehn, the economic affairs commissioner, were next to leave. A stony-faced Merkel departed by the back door. "It was moment that the EU nearly broke," said one official.
Pleading for "compromise" and a decision by a deadline of Sunday's eurozone summit in Brussels, Barroso began Thursday morning by circulating four "strictly confidential" and complex papers on how to both increase the EFSF's clout and set out the rules for it to recapitalise banks and buy distressed bonds. The intervention did not go well, with Germany again proving to be an obstacle.
Following a ruling in Germany's all powerful constitutional court, Merkel was legally bound to seek a prior mandate on the EFSF from the Bundestag and German MPs were not playing ball. The issue was not helped when MPs expressed vocal fury over getting the commission's four papers in English rather than German. Tense talks degenerated further when, after a hurried translation, the MPs realised that the proposals did not include figures on how the EFSF's power could be increased without increasing Germany's €211bn contribution to the fund. After a two-hour grilling by the Bundestag's budget committee a visibly rattled Wolfgang Schäuble, Germany's finance minister, left the meeting refusing to comment on whether the crisis eurozone summit this weekend would have to be called off.
Minutes later, after being seen shouting into her mobile phone, presumably talking to Schäuble, Merkel cancelled her planned Friday morning speech to MPs and Berlin phoned Brussels to ask that Sunday's summit be postponed until Wednesday. "Without any concrete proposal for increasing the efficiency of the fund the chancellor can't present a complete set of proposals," said Norbert Barthle, a senior member of the chancellor's Christian Democrats.
As news came through to Brussels that Mrs Merkel wanted to cancel the summit – already postponed once, causing the markets to plunge – officials were "literally tearing at their hair", said one civil servant. Herman Van Rompuy, who chairs summits of EU leaders, had to break the news to Paris.
"There was an explosion and the Elysee insisted that the meeting must go ahead. Delay would lead to a market wipeout on Monday and French banks and France's AAA would be in the frontline," said a source. After personal entreaties from Sarkozy, Van Rompuy and Barroso, the German chancellor accepted that a three-day series of meetings over the weekend would continue as planned. "But instead of a final decision on Sunday, she will take back a provisional deal to the Bundestag on Monday or Tuesday and hope it's enough to get it though at a second summit on Wednesday," said a diplomat. "Europe is at the brink. There are no good options anymore just lesser evils that people must live with."
Without the ECB's firepower, the options are ugly and, officials freely admit, smack of "smoke and mirrors" with too much reliance on the very leveraging and financial products the EU has previously blamed for causing the initial banking crisis. It was that mess, of course, which spilled over into the sovereign debt crisis that has threatened to tear down the euro.
The current front-runner for leveraging the EFSF is the "first loss insurance" option or "Allianz plan". Under this option a proportion of sovereign debt risk would be underwritten by the EFSF - between 20pc and 25pc is the proposal - in an intervention that would pay the fees for private investors to take out insurance on bonds. A higher insurance subsidy, of up to 40pc, could be given form Greek, Irish or Portuguese bonds.
In this way each €100bn of the EFSF could be leveraged as high as €500bn. Such a move would take the assets at the disposal of the fund, after its commitments in Ireland and Portugal, to €1 trillion.
"But one trillion is not the multi-trillion answer markets want," said one diplomat. While Germany "can live with it", France is uneasy with the scheme, which could impose new burdens on its national budget, putting its AAA status at risk.
"The problem is that if the firepower is to be artillery rather than small arms then it immediately has a cost implication in the form of capital assets or guarantees held by the EFSF," said an EU official.
France, via BNP Paribas, has intervened, calling for the EFSF to write credit default swaps (CDS) for investors buying Spanish or Italian bonds.
"Can the euro be saved by spreading the debt and slicing and dicing the EFSF's capital or guarantees into highly complex financial products?" asked one national finance ministry official. "It's looking much more like a fiendishly clever conjuring trick, or even a Ponzi scheme, than the big bang the markets want."
The gloom is even deeper and darker over discussions on the size of the haircut or writedown of the value of Greek sovereign debt to be passed on to private investors, a decision that could threaten banks with high-exposure to the debt, especially in France.
Germany, the Netherlands, Britain and others "take the view that there needs to be a substantial writedown" of up to 50pc to 60pc on the sovereign debt, according to officials. The view is also said to be held by the IMF, an important player, because it is underwriting a third of the bailout to Greece.
"No one thinks Greece can pay back debt worth 180pc of their GDP amid recession, social conflict and rocketing unemployment," said a senior source.
But France is very worried about the possibility of an involuntary haircut and a "credit event" that will see its banks pushed to the limit of credit-worthiness with massive implications. According to diplomats, France can accept that the July 21 package suggesting a voluntary write down of 21pc can be reopened but only in the 35pc to 45pc range. If the haircut is kept below a "credit event" level, then France will accept a European Banking Authority plan to set capitalisation levels at 9pc but, say diplomats, only if that expressly rules out new cash injections from the government to French banks. Germany takes a different view, telling France that if it wants to have a big bang EFSF, it needs to bite the bullet of substantial costs on top of a Greek haircut and accept the pressure on French banks.
"Is there room for a Franco-German deal behind an EU agreement that saves the eurozone without France losing its AAA status at presidential election time? Can the eurozone function at all if France, its second largest economy, loses its AAA?," asked an aide to a senior EU official.
"If an unstoppable force meets an immovable object, what happens? We might be about to find out."