Berlin gives cautious backing to Paris euro reform plan

Four months on, Germany has given a guarded nod of agreement to euro zone reform proposals from French president Emmanuel Macron.

On Friday morning, after 24 hours of talks, Germany’s prospective coalition partners signalled it would back the deployment of EU budgetary funds to stabilise euro zone economies.

Until now chancellor Angela Merkel and her Christian Democratic Union (CDU/CSU) have been cool and non-committal on French proposals to create an euro investment fund, overseen by a euro finance minister. However, a week of exploratory coalition talks in Berlin with centre-left Social Democratic Party (SPD), far more enthusiastic about the idea, appears to have shifted the Merkel camp beyond its comfort zone.

“I think we have reached excellent results,” said Martin Schulz, SPD leader and ex-European Parliament president. “Together we are determined to use Germany’s strength, both economically and politically, to make Europe a great project again.”

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In a tacit admission of recent neglect, Germany’s prospective coalition partners gave the EU the first three pages of their 28-page preliminary coalition agreement. However, those three pages are heavy with constructive ambiguity.

The paper backs the idea of transforming the ESM bailout fund to a European Monetary Fund, but makes no reference to the proposal for a euro finance minister. In addition it says additional euro spending “may” form the basis of a future euro zone investment budget.

Berlin is willing to agree a higher German contribution to fill the budget hole left by the UK’s departure, the paper said, without indicating by how much.

Still smarting from public anger at euro crisis bailouts, and wary of the euroskeptic Alternative für Deutschland (AfD), Dr Merkel’s traditionally pro-EU alliance is now reticent to backing any measures seen as a burden on German taxpayers.

Stability

After waiting since September for a response from Berlin, Paris welcomed Friday’s paper as “important for the stability and future of Franco-German relations, but especially Europe”.

European Commission president Jean-Claude Juncker called it a “very significant [and] positive...contribution to the European debate”.

Even if Berlin has opened the door to euro zone reform, Merkel officials insist that anything beyond superficial changes will be a lengthy process. On this front, Minister for Finance Paschal Donohoe, on his first visit to Berlin in his new job last August, insisted Dublin was in no rush.

In a clear reference to the Trump-era “America First” policies, the German parties underline their “clear dismissal of protectionism, isolationism and nationalism”.

“Global challenges need European answers,” the document adds.

On EU accession talks with Ankara, stalled amid concerns Turkey has become an authoritarian regime, the negotiating paper sees no prospect of visa or customs concessions, and wants to “neither close nor open” any negotiating chapters – but falls short of demanding an end to talks.