German reunification occurred, in all but name, at midnight on Sunday morning. That was the start of Tag X the “X-Day” on which East and West Germany merged their economies, exchanging the tattered currency of the East for the robust Deutsche marks of the West. In the political equivalent of a friendly buyout, East Germany plunged into the chilly but invigorating waters of capitalism. Economic integration is the point at which Germans begin to think and act as one nation. The rest of the reunification process will be little more than a formality, to be completed at a pace determined mostly by Germans, rather than outsiders. By next December, one Germany should be an accomplished fact, and a new powerhouse will take shape in the center of Europe.

Reunification is a chancy venture. Socially, the two Germanys will endure a clash of cultures after years of separation (page 37). But NEWSWEEK’S chief economic correspondent concludes that the merger will be a booming financial success in the end (page 31). No one is more bullish on the new Germany than Helmut Kohl, the Western chancellor who stands to become the first electw leader of the reunited state. The end of the cold war gives Kohl’s Germany enormous scope to exercise its growing influence–not to displace the United States or the Soviet Union, but to shoulder its way in between them, asserting economic and political power in an arena where military might no longer seems decisive. “We want to lead,” says an official in Kohl’s chancellery. “In today’s world, there is no reason why we should not.” Germany will lead by setting the agenda for Europe, spearheading the opening to the newly freed East and counting cadence for economic and political integration in the prosperous West.

As German clout increases, U.S. influence in Europe will wane. At this week’s NATO summit in London, Germany is likely to play a more open leadership role than ever. And in Houston next week, when seven wealthy nations hold their annual economic summit, Bonn will push its partners, including the reluctant Americans, toward another down payment on reunification: an ambitious program of economic aid for the hard-pressed regime of Soviet President Mikhail Gorbachev (page 30).

There is nothing unnatural about German leadership in Europe. The postwar era was a historical anomaly in which the Continent was dominated by two outside powers, whose alliances and nuclear arsenals maintained a fretful balance. German reunification creates a new, and more natural, balance of power, one that changes the relationships between key players. But a new balance does not guarantee stability. “It’s fine to say Europe should return to its natural state,” remarks a senior U.S. diplomat, “but in its natural state, Europe habitually went to war. One reason it did so was because of this thrusting, somewhat clumsy power in the middle of Europe.”

So far, Kohl and his political ally in East Germany, Prime Minister Lothar de Maiziere, have maneuvered adroitly. But at the NATO summit, Kohl will need help from his friends to sell Moscow on the key idea that a united Germany should bellong to the Western Alliance. Kohl wants to do that, in part, by making NATO more “political,” reducing any apparent military threat to the Soviet Union. NATO also is expected to offer a nonaggression treaty to members of the nearly defunct Warsaw Pact, including the Soviet Union. The alliance will commit itself to changing its military deployments, adopting a more defensive posture. And NATO will lay out a plan for strengthening the nebulous Conference on Security and Cooperation in Europe (CSCE), which Moscow hopes to use as the vehicle for a new European security system.

Ouick fix: Bonn also is ready, sources say to propose a crucial concession to Moscow, limiting the size of a united Germany’s armed forces. Earlier, the West insisted that the issue could not be dealt with in the first round of the Vienna negotiations on conventional forces in Europe, known as CFE 1, and would have to be left for a second round. Although details of the plan were still being hammered out last week, the size of national forces now is expected to be determined in CFE 1, which both sides hope to sign next November, clearing away another obstacle to reunification.

Moscow is willing to contemplate German membership in NATO, under certain conditions. They include the restructuring of NATO and the development of a new special relationship between the Soviet Union and Germany. That relationship is taking shape already. Soviet Foreign Minister Eduard Shevardnadze and West German Foreign Minister Hans-Dietrich Genscher, Kohl’s coalition partner, meet regularly–sometimes weekly. Bonn is committed to helping Moscow economically, not just through the proposed aid package, but by assuming East Germany’s trade obligations to the Soviet Union. And Genscher has been more open than other Western leaders to the idea of strengthening the 35-nation CSCE.

To some extent, the United States has been cut out of the loop. The contacts between the West Germans and the Soviets are so numerous–involving hundreds of diplomats, businessmen and others on both sides– that not all the details get reported to Washington. So far, Bonn and Moscow seem to have a stake in keeping the United States informed about their dealings with each other, both governments are giving Washington at least partial reports. Some American officials worry, however, that the Germans–particularly Genscher– may give away too much in their eagerness to placate the Soviets.

The West Germans insist that their relationship with Moscow has not led to any estrangement from Washington. In part, that is because the Bush administration has long since tilted toward Bonn. “George Bush is the only world leader who has pushed all his chips into the middle of the table on behalf of a united Germany, with out reservations,” says a White House aide. Bonn is grateful for the support; it has promised privately that it will do everything it can to strengthen U.S. ties to the European Community, something Washington seeks as economic integration approaches at the end of 1992. For their part, the Germans still need U.S. sponsorship. “There are things the Soviets won’t take from us that they will take from the Americans,” says a senior West German official. Last February, for example, it was the Americans, not the Germans, who made the first concerted pitch to Moscow about keeping Germany in NATO. Even as its confidence grows along with its power, the new Germany recognizes that old superpowers still have their uses.