Angela Merkel, the leader of the German Christian Democrats, has become a useful ally of the British Government, even though her likely election as Chancellor is still some months away. By recognising that budget reform is necessary, and by conceding that she understands Britain’s concerns over the rebate, she has already shown more leadership than most of the prime ministers gathered around the table in Brussels last night. For too many of those leaders, the budget wrangle has been an excuse not to focus on broader economic and political issues, including the resounding defeat of the EU constitution in France and the Netherlands.

At a moment when they should be responding to the discontents and anxieties that those votes exposed — about political arrogance, remote institutions, stagnating economies and faltering social models — Europe’s leaders have taken refuge in old disputes about farm payments, the British rebate, or how much regional aid prosperous Spain is to continue to claw out of Brussels even though the needs of the Union’s new members are manifestly greater. It is for all the world as though nothing seismic had occurred.

The institutional EU has its own version of Cartesian logic: “I spend, therefore I exist.” President Chirac’s interests lie in demonstrating France’s power to resist any radical transformation of the EU’s spending priorities. Germany’s do not; and yet Gerhard Schröder seems to think the best final service he can do Europe as Chancellor is to pretend that Franco-German interests are indivisible and their influence is still paramount. Mr Blair takes over the EU presidency next month in the knowledge that, so long as this duo is in office, there will be reluctant support from Paris or Berlin for his appeal to “reconnect the priorities of the EU with the priorities of the people of Europe”. But in September, when Germany is expected to hold early elections, the prospects will be improved.

Frau Merkel would not be recognised in America, or even in Britain, as a zealous free-market reformer; zeal is not a quality appreciated in Germany’s consensual politics. But her expected victory will nonetheless transform the European scene. At home, she has been outspoken about the bankruptcy of the German model, the role of individual responsibility and the need for a more flexible market economy. Closely interested in foreign policy, she is said to be determined to reconstruct the German partnership with the US that Herr Schröder, the most mercurial of all postwar chancellors, has damaged so badly.

That alone would bring Germany closer to Britain’s international position. But the potential for collaboration is even greater in the European Union context. Germany may for the first time be won over to a vision of Europe that puts “integration” on the back burner, in favour of greater respect for political diversity as well as economic flexibility. And Germany could give Mr Blair vital support on the stalled EU directive to open up the vital market in services. The two will disagree on some strategically important issues, notably EU membership for Turkey, which Frau Merkel insists must go no further than a “privileged partnership”. But she appears genuinely to understand that a wider, more inclusive approach to European decision-making is overdue. Whatever the result of this summit, reinforcements are on the way.