Macron visits Merkel in bid to salvage eurozone reform plans

French President Emmanuel Macron (L) and German Chancellor Angela Merkel meet at the Elysee presidential Palace in Paris, France, 16 March 2018. [EPA-EFE/LUDOVIC MARIN / POOL]

French President Emmanuel Macron heads to Berlin Thursday (19 April) for talks with Chancellor Angela Merkel, hoping to breathe fresh life into his grand vision for EU reforms in the face of growing German resistance.

In a sign of the low expectations for a breakthrough, Merkel said the leaders’ brief meeting would be “another building block” on the road to finding “common solutions” ahead of a European Union summit in June.

The pair are due to give press statements at 1:00 pm (1100 GMT) before holding talks at the Berlin Palace, a historic site undergoing extensive reconstruction – an apt setting for discussions on Macron’s plans for a post-Brexit overhaul of the bloc.

But the Frenchman’s dreams of driving through the changes with Merkel by his side were dealt a blow this week when her own conservative CDU/CSU bloc raised objections to his flagship proposals for a common eurozone budget and an expansion of the EU’s bailout fund.

Macron defended his bold ideas in a passionate speech to the European Parliament on Tuesday, describing eurozone reforms as “indispensable” to challenging the rise of authoritarianism and nationalism on the continent.

But observers doubted whether his lofty words changed any hearts and minds in Berlin.

“Macron must feel like a suitor who tries and tries to woo his beloved, even singing under her balcony, but is fobbed off with platitudes,” the Handelsblatt financial daily wrote.

Macron offers half-hearted defence for waning eurozone push

Emmanuel Macron toned down his ambition of completing the Economic and Monetary Union in a speech to the European Parliament on Tuesday (17 April), as he appears to be losing Germany’s backing and faces mounting pressure at home on unpopular economic reforms.

North-South divide

Much of Berlin’s resistance is rooted in deep-seated German wariness of any measures that could lead to debt pooling, or German taxpayer cash flowing to spendthrift neighbours.

And while Merkel has in the past voiced cautious support for Macron’s ambitions, she has stayed vague on details.

Having just started her fourth term as chancellor, her room for manoeuvre has been limited by her bloc’s weak showing in last year’s general election, which saw traditional parties lose millions of voters to the far-right.

With her parliamentary majority badly reduced, Merkel can’t afford a rebellion by her own MPs.

And although her centre-left coalition partners the Social Democrats are more openly pro-EU, Macron lost his loudest cheerleader when former European Parliament chief Martin Schulz stepped down as SPD leader in February.

“The French president knows very well that not all his ideas can be realised, we are now looking at what is possible,” Social Democratic Finance Minister Olaf Scholz told the Frankfurter Allgemeine daily.

Not all Macron's EU reforms possible, German finance minister says

German Finance Minister Olaf Scholz said EU reforms proposed by French President Emmanuel Macron should be addressed before European elections next year, but added that some of the proposals were not feasible.

Strict conditions to a “European Monetary Fund”

Lawmakers from Merkel’s CDU/CSU alliance threw down the gauntlet this week when they attached strict conditions to transforming the EU’s bailout fund into a European Monetary Fund that can act as a “lender of last resort”.

Setting up such a fund would require a change to EU treaties, they wrote in a position paper, which would require the approval of each member state’s parliament. They also said national lawmakers, not the European Commission, should have the final say over any aid disbursements.

Merkel told lawmakers from her conservative bloc on Tuesday that she favoured the EMF concept as long as member states retain scrutiny over the body, participants at the meeting said.

One participant said Merkel wanted an EMF to act with conditionality – the same approach taken by the International Monetary Fund, which attaches strict reform conditions to aid.

“It’s not that one side is putting the brakes on and the other pushing ahead,” one of the participants at Tuesday’s meeting said. “We want to find a good reform path together.”

In line with leading members of her conservatives in parliament, Merkel also rejected plans floated by the European Commission to make use of a specific EU legal provision to develop the existing euro zone bailout fund into an EMF.

Eurozone leaders pledge to conclude banking union by June

Friday’s eurozone summit ended with an agreement to finalise the banking union by June, but the future of the fiscal union remains unclear as leaders remained divided.

Le Maire: “Silent, secret work under way”

Still, officials in Berlin and Paris both express confidence that they will find a common stance before a European Union summit on June 28-29.

“I hear here and there talk of difficulties between the German and French governments on transforming the euro zone,” French Finance Minister Bruno Le Maire told lawmakers in the lower house of parliament on Wednesday.

“Let me reassure you that the silent, secret, demanding work under way will allow us to reach a true Franco-German roadmap by the time of the next European summit in June,” he said, adding he expected a “sensible and ambitious compromise”.

In Berlin, a government spokeswoman said Germany and France “have the firm desire to find a joint way forward”, echoing Merkel’s own cooperative tone at a news conference on Tuesday.

France and Germany, which account for around 50% of euro zone output, are essential to the reform drive. But while they often put on a strong show of political unity and shared intent, the devil is frequently in the detail.

Macron convinces Merkel to hold key debate on future of euro in March

Amid the political paralysis in Germany, EU leaders decided on Friday (15 December) to postpone for March a “strategic political discussion” on the future of the eurozone and adopt a ‘reform roadmap’ in June.

“Jumbo Council” of European finance and economy ministers?

On Tuesday, Merkel said creating a euro zone banking union was a priority for her, but she also broadened out the reform question to include a European asylum system, as well as foreign, defence and research policy.

Framing reform as such a broad issue risks diluting Macron’s drive to beef up the euro zone with extra funding firepower.

Merkel also wants to make economic competitiveness a priority for the euro zone, rather than simply amassing funds for countries in trouble, and has suggested a “Jumbo Council” of European finance and economy ministers, government sources say.

But in an indication of the divisions within her government on euro zone reform, the Handelsblatt business daily reported that Merkel’s junior coalition partner, the left-leaning Social Democrats (SPD), reject the idea.

The SPD sympathises with Macron on the euro zone and wants him to be rewarded for his efforts to reform the French economy, well aware that a big chunk of French voters remains susceptible to far-right and far-left populists sceptical about the EU.

Manfred Weber: We have to find consensus with France

While the debate about the future of Europe is gaining momentum, the leader of the European People’s Party (EPP), Manfred Weber, calls on the German Christian Democrats to show more willingness to compromise in an interview with EURACTIV’s media partner Der Tagesspiegel.

Germany is not alone in slamming the brakes on Macron’s drive to bolster the eurozone.

A group of smaller northern EU countries, led by the Netherlands, have also pushed back, warning that they refuse to be “railroaded” into sweeping reforms.

Faced with these northern headwinds, France has stepped up efforts to win support from the bloc’s southern countries, recently inviting Italy and Spain to help steer the reform process.

Eight northern EU states urge caution in eurozone reforms

Eight northern European countries said today (6 March) that euro zone reforms should focus on completing the banking union, improving compliance with budget rules and setting up a European Monetary Fund, with more ambitious plans left for later.

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