Merkel urges ‘compromise’ on eurozone reform

German Chancellor Angela Merkel (L) receives the French President Emmanuel Macron at the entrance of the Berlin Palace for a working meeting, in Berlin, Germany, 19 April 2018. [EPA-EFE/FELIPE TRUEBA]

Germany’s Angela Merkel called for a spirit of “compromise” on reforming the euro zone at a meeting on Thursday (19 April) with French President Emmanuel Macron, who pressed for “solidarity” among members of the currency union.

Meeting in Berlin, the French and German leaders stressed their common will to reform the EU, saying before the talks that they would present a united front at June meeting of European Union leaders that will address the reform of the 19-member euro zone, among other issues.

But while Merkel agreed the eurozone was “not yet sufficiently crisis-proof”, the pair did not bridge their fundamental differences on economic and fiscal policy.

The young French leader voiced his passion for a sweeping overhaul for a post-Brexit EU that would have “at its heart” eurozone reforms such as a common budget and finance minister, and greater “solidarity” within the bloc.

Germany’s veteran chancellor, who has long preached painful belt-tightening for struggling European economies, maintained Berlin’s cooler focus on the need for all members to first boost their own “competitiveness”.

“We both think that the eurozone is not yet sufficiently crisis-proof,” she said at a joint Berlin press conference with Macron.

“There are French proposals, but there are also German proposals,” she said.

Post-crisis recoveries in Ireland, Spain and Portugal had been a result of “a mix of solidarity and national effort,” she argued.

Looking ahead to a joint Franco-German roadmap to be presented before a key June EU summit, she said that “we bring some different aspects to the table, but I believe that the sum of our proposals can ultimately lead to a good result”.

Macron visits Merkel in bid to salvage eurozone reform plans

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.

Resistance in Berlin

Merkel – once dubbed the “Queen of Europe”, but largely absent from the debate during half a year of painful coalition talks – recently launched her fourth-term government, but is seen as domestically weakened.

This week she has faced growing resistance from her own CDU/CSU conservative ranks to Macron’s lofty vision that critics fear threatens new burdens and risks for German public coffers.

Stressing the need for compromise, Merkel said: “We each bring some different facets but I think the sum of our proposals will make for a good result in the end.”

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.

“No monetary union can exist without elements of convergence,” the French leader told a news conference with Merkel in the German capital before their talks.

“The most important thing is not to react on such and such instrument at this stage, but to be sure that we share the same goals and to have a joint political objective,” he added.

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.

Migration policy thrown into the mix

At pains to present a united front, the pair stressed they would tackle a range of issues beyond the euro zone reform, including migrant policy which is one of Berlin’s most pressing priorities.

Macron reiterated a proposal made at the European Parliament to subsidise local authorities who welcomed refugees, a move likely to please German mayors.

“We can’t let this or that country alone carry the burden of hosting and integrating (migrants),” he said in recognition of Germany’s leading role in accepting refugees and asylum seekers, a bold move that cost Merkel votes in the last federal election.

On a European asylum system, Merkel said the two leaders agreed on many points, and concurred that offering incentives was a better approach than talking about penalties.

Differences on EU bailout fund and banking union

Macron’s vision also includes turning Europe’s existing bailout fund into a European Monetary Fund (EMF), to act as a buffer in any future financial crises in the bloc, which was nearly torn apart in a debt crisis that took hold in 2009.

He has also suggested the euro zone have its own finance minister and, at one point, floated the idea of a budget for the currency bloc worth hundreds of billions of euros.

Germany’s Social Democrats (SPD), Merkel’s junior coalition partner, sympathise with Macron’s call for solidarity. They want him to be rewarded for efforts to reform the French economy, well aware that a big chunk of French voters remain susceptible to far-right and far-left populists sceptical about the EU.

But Merkel’s larger conservative bloc insists on what they call the principle of ‘liability’, whereby individual member states carry responsibility for their own economic risks.

Merkel said she was very optimistic about completing a banking union. Berlin’s focus has long been on banks first reducing the risks they take in lending.

“We are also ready, perhaps not in the immediate future but in the longer term, to agree on a common deposit guarantee system,” said Merkel. “But we want liability and risks to be kept together.”

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.

Underlining a sense of urgency for reform in Brussels, European Commissioner for Economic and Financial Affairs Pierre Moscovici warned momentum could be lost for deepening euro zone integration if decisions are not taken at the June summit.

“We are some way from reaching a consensus on the priorities and method for moving the euro area forward and time is running out,” Moscovici said in a speech at the Peterson Institute for International Economics in Washington.

Moscovici: Referendums not needed to deepen the eurozone

The European Commission backed alternative options to referendums in order to pass major changes needed to deepen the Economic and Monetary Union amid “broader questioning” about the single currency.

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