Angela Merkel's supporters praised her for getting France to drop demands to use the European Central Bank to leverage euro crisis funds, but looked like making a meal out of the German parliament's new right to be consulted on how these are used.

Merkel's Battle for our Euro, was Monday's headline in the mass-circulation conservative paper Bild, saying she taught France's Nicolas Sarkozy that the EFSF rescue fund cannot be used to print money to solve the debt crisis.

The chancellor must stick to her guns -- in the interests of Germany and of Europe, said the newspaper.

But while her supporters in the Bundestag (lower house of parliament) welcomed the assertiveness in Sunday's summit from a leader often accused of dithering, they also risked delaying Europe's response to the debt crisis at a crucial juncture by insisting on a full debate before Wednesday's second summit.

Her Christian Democrats' (CDU) floor leader Volker Kauder was said to want a full debate rather than just a vote by the 41-member budget committee, which would be quicker and less risky while still fulfilling new rules on consulting MPs.

A government source said the lower house would vote on the issue on Wednesday.

With criticism ringing in Germany's ears from the head of the Eurogroup of single currency members, Jean-Claude Juncker, about it being slow to make decisions, Merkel met the heads of the main parties to seek consensus.

As a result of a constitutional court decision last month, she cannot agree to changes to the 440 billion euro European Financial Stability Facility (EFSF) without the agreement of the Bundestag's budget committee, scheduled to meet on Tuesday.

She is then due to address parliament on Wednesday before returning to Brussels for what should be a more decisive summit on boosting the firepower of the EFSF, raising the contribution of private banks to Greece's rescue, and getting European banks to increase their own capital to prevent contagion.

Her conservative bloc's chief whip, Peter Altmaier, said Sunday's summit made headway on all three issues, including using the EFSF to avoid having to print money, and it should now be possible to produce the comprehensive crisis response that Merkel and Sarkozy have promised by the end of this month.

NEEDS MANDATE

The chancellor negotiated well in Brussels. She showed strong leadership, Altmaier told reporters.

The French president says he sees things just like Angela and I see that as progress, said the conservative premier of Hesse state, Volker Bouffier. Germany and France must take the same line as the most important two countries.

Sarkozy ceded to German insistence at Sunday's summit that the ECB should not be used to fight the crisis, which poses an especially big threat to French banks and France's triple-A sovereign debt rating.

Instead, the euro zone may take up Germany's proposal of boosting the EFSF's firepower by using it as a form of debt insurance, combined with seeking help from emerging market economies like China and Brazil to support the euro zone's ailing secondary bond market.

Merkel's spokesman Steffen Seibert said these two options, which had no ECB involvement, were the only two left on the table for leveraging the EFSF and would be discussed by the summit on Wednesday. He said they were not mutually exclusive.

He said the plan was for the budget committee to study what details were available and give Merkel a mandate to take part for Germany in Wednesday's decisions with European leaders.

The spokesman for Merkel's CDU on this committee, Norbert Barthle, said in a statement to Reuters that it was important for Chancellor Merkel to be able to defend German interests with the backing of the Bundestag.

By tradition, the powerful committee is chaired by an MP from the opposition -- its current head being Merkel's namesake from the center-left Social Democrats, Petra Merkel. The chancellor's center-right coalition has 22 seats on the committee.

Some of Germany's specialized press was less optimistic than Bild or Merkel's political operators about the European Union's chances of resolving the debt crisis in the 17-nation euro zone this week.

The Financial Times Deutschland said European governments' inability to persuade banks to take a bigger haircut on their Greek debt than the 21 percent so far shows how difficult it will be to find a comprehensive solution on Wednesday.

Business daily Handelsblatt said banks will have to waive 60 percent of their Greek debt rather than 21 percent.

(Additional reporting by Annika Breidthardt, Gernot Heller and Oliver Denzel; Writing by Stephen Brown; Editing by Catherine Evans)

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