Emmanuel Macron, Angela Merkel differ on fiscal policy in EU reform push

The leaders of Germany and France met on Thursday to try to work out a common position on reforming the euro zone, a sensitive issue that is testing the new government in Berlin just a month after it took office.
German Chancellor Angela Merkel (right) and French President Emmanuel Macron hold a press conference following a visit at the Humboldt Forum construction site in Berlin, Germany, on April 19, 2018.
German Chancellor Angela Merkel (right) and French President Emmanuel Macron hold a press conference following a visit at the Humboldt Forum construction site in Berlin, Germany, on April 19, 2018.PHOTO: EPA-EFE

BERLIN (AFP) - German Chancellor Angela Merkel and French President Emmanuel Macron on Thursday (April 19) stressed their common will to reform the European Union, but without bridging 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" euro zone 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 euro zone 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 road map 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".

 

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.

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.

Lawmakers from Merkel's conservative alliance threw down the gauntlet 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.

Macron's proposed eurozone investment budget meanwhile was dismissed by Merkel's party as not "a top priority" when the bloc had yet to figure out how to plug the hole left in the wider EU budget by Britain's departure.

Differences also remain on the completion of a eurozone "banking union", generally seen as one of the least controversial issues but viewed sceptically in Berlin, in the belief that Germany would be on the hook to save fragile banks in other countries.

REFORMS 'INDISPENSABLE'

Macron had on Tuesday tried to breathe fresh life into his grand vision for EU reforms.

In a passionate speech to the European Parliament, he called eurozone reforms "indispensable" to challenging the rise of authoritarianism and nationalism on the continent.

But given Germany's reluctance, expectations for a breakthrough in Berlin had been low.

"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.

For Merkel, 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.

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.