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France, Germany Seek to Overcome Differences on Eurozone

Posted by hkarner - 18. März 2018

Date: 17-03-2018
Source: The Wall Street Journal

France’s Macron wants to push wideranging reforms; Germany’s Merkel is less enthusiastic

PARIS–The road to eurozone renewal envisioned by French President Emmanuel Macron won’t be a speedy autobahn.

At meetings between French and German officials in Paris as German Chancellor Angela Merkel visited for the first time since her re-election, officials stated their differences on key planks for rebuilding the eurozone’s architecture. They pledged to come up with a “road map” for overhauling the currency bloc in June.

“We are not always of the same opinion, but Germany and France have already achieved many things together,” Ms. Merkel said. She added she is “firmly determined” to achieve more.“Today it is vital that we are able to build this new ambition together. That is our task between now and June,” Mr. Macron said standing alongside Ms. Merkel before a dinner here.

Mr. Macron has called for a deep overhaul of the European Union and demanded greater sharing of resources and liabilities in the eurozone, which he says is necessary to shelter the currency bloc from future crises. In the longer term, he says the currency bloc should have a shared budget administered by a single finance minister.

But during a long period of political uncertainty in Berlin, Mr. Macron’s plans have stagnated. French officials said the Friday visit would kick-start negotiations ahead of a summit of eurozone leaders next week, and in time to agree a road map for reforms by June.

The new German government, however, has shown little inclination to revise Berlin’s traditional opposition to pooling resources in a bloc where many members have deficits and high debt burdens.

Instead, officials in Berlin have indicated that they would like to shift the focus from fiscal matters and burden-sharing to discussing migration and strengthening the EU’s external borders.

After a meeting earlier Friday with his new German counterpart, Olaf Scholz, French finance minister Bruno Le Maire said the two sides have stumbled in recent weeks on new rules for capital markets in the eurozone and how to structure the banking union. French officials say they are open to a gradual approach to creating a shared backstop for the eurozone’s banks, but they can’t wait until there is zero risk in the system before moving ahead.

“Friendship is also about recognizing differences that should be resolved,” Mr. Le Maire said after meeting Mr. Scholz. “We are very close to agreements, but there are technical difficulties that have very heavy political, financial and economic consequences,” he added.

The stakes are high for Mr. Macron as he has embarked on unpopular economic overhauls to try and secure a grand bargain for the eurozone. French officials say overcoming labor-union resistance to loosen labor laws and cutting taxes that weigh on business gives the country a stronger voice and credibility to demand more burden-sharing in Europe.

“For long years, Germany has waited for France to carry out reforms. France has done them in exceptional circumstances in recent months,” Mr. Macron said alongside Ms. Merkel.

Ms. Merkel invited the French government to hold a summit with senior ministers in the coming months to prepare for the June council, where France wants to finalize the road map for European reforms. She said the eurozone should also strive to become more competitive in the global economy and work on converging its corporate tax systems.

“We have a lot of work to do,” Ms. Merkel said. “Our government is determined to work closely and intensely with France.”

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