Caught off guard by the deal reached in the French town of Deauville on Monday, Merkel's center-right allies said German taxpayers who bankrolled Greece's rescue package had been promised automatic sanctions on future debt sinners.

Instead, it will take a political decision by a qualified majority of euro zone governments to start disciplinary action against any state with an excessive deficit or debt level, and a majority of countries can still block any financial sanction.

Policymakers like European Central Bank executive board member Juergen Stark complained that the compromise on reforms to the European Union's stability pact fell far short of proposals by the bloc's executive branch.

"The German government has failed spectacularly in its aim of making the stability pact a new instrument for budget discipline," said the Financial Times Deutschland on Wednesday.

"Rarely has a government started so ambitiously with a central issue like the stability pact and ended up caving in so soon, so quickly and so thoroughly," said an FTD editorial.

Merkel's spokesman Steffen Seibert told reporters it was very positive to see Germany and France "pulling together" while Cabinet ministers were all "on the same page" on the issue.

He said the Franco-German goal of changing the EU treaty in 2013 to suspend the voting rights of countries that breach budget rules was ambitious, adding: "If Germany had not got France on its side, we could have forgotten the whole thing."

EU diplomats said Paris' declared backing is no guarantee that such an amendment will pass, since it requires unanimity of the 27 member states.

Merkel's liberal Free Democrat (FDP) coalition partners were withering in their criticism. FDP secretary-general Christian Lindner said he was astonished at the Deauville deal and one FDP European Parliament leader said Merkel had been comprehensively "outmaneuvered by French President Sarkozy."

"She had made a clear promise to German taxpayers that if Germany gave Greece billions of aid, the euro stability pact would be strengthened. Merkel has broken her promise," said Silvana Koch-Mehrin, an FDP vice-president of the assembly.

"Renouncing automatic sanctions for debt sinners begs the question: What tools do we have to prevent further crises like the Greek debacle?" she asked, lamenting that over-indebted countries would basically "decide on their own punishments."

Members of Merkel's own conservative Christian Democratic Union (CDU) were more cautious in their criticism, but CDU finance expert Leo Dautzenberg said while he welcomed the deal, "overall we would have liked the sanctions to go further."

The conservative Frankfurter Allgemeine Zeitung daily said Merkel's government had repeatedly demanded strict and automatic measures against countries violating the bloc's deficit rules, but now "the chancellor doesn't want to remember any of that."

Merkel spokesman Seibert said it was wrong to "act as if Germany had abandoned a position agreed across Europe.

"The fact is only three other countries alongside Germany took this position," said Seibert, adding that the alternative to the compromise reached in Deauville was that "nothing would have happened and there would have been a row."

But the FAZ said the French had prevailed in their quest for extra steps in the sanctions process while Berlin's demand for an insolvency law for states did not figure explicitly in the German-French declaration from Deauville.