Germany has the confidence and capacity to lead Europe, but, ahead of Angela Merkel’s expected re-election, that doesn’t mean its partners have to like it, writes John Lloyd.    

A new picture of the economy shows it is much smaller and the country’s debt burden is much heavier but also suggests that the domestic economy is powering ahead.

Stocks, bond yields and the dollar are all falling, yield curves are flattening and sterling is marching higher. The “reflation” trades of 2016 that were supposed to mark a turning point in global markets are fading.

Even if the suggestion that Chancellor Angela Merkel drew a line in the sand more than a good country mile short of the kind of concessions Prime Minister David Cameron imagined might be made to prevent Britain’s withdrawal from the European Union has been reinterpreted to soften that inevitable reality check from Berlin, there is a simple lesson for our Government in its difficulties over Irish Water in that weekend spat.