Merkel, Macron and key eurozone reforms

Brussels – After months of silence, the grand ambition of French President Emmanuel Macron to reform the eurozone has finally received a response from German Chancellor Angela Merkel, Europe’s most powerful leader.

In a wide-ranging newspaper interview, Merkel on Sunday laid out her vision of what Germany would — or would not — tolerate in reforming the European Union’s single currency, a top priority for France’s young leader.

The goal is to officially deliver a list of proposals at an EU summit on June 29 that could be adopted in time for European elections in May 2019.

Here is a list of the key reforms expected at the June 29 summit as well as a few Macron ideas that were summarily discarded.

 

– Eurozone budget –

 

National governments have for months been haggling over creating some sort of budget capacity for the single currency bloc which could be used in case of crises or economic shocks.

The EU commission last week unveiled a modest version of the idea — building a budget firepower of just 55 billion euros — one that Merkel seemed to quietly back in her interview.

Germany is open to something modest and controlled by the member states, not the EU’s institutions, that could also be used to help implement tough reforms.

Eurozone finance ministers have accepted the idea of upgrading the responsibilities of the European Stability Mechanism (ESM), which oversees loans to troubled member states, such as Greece, into some sort of European Monetary Fund.

But beyond the concept, Europeans struggle to agree on the exact missions of this future body.

Everyone agrees that it should assume the role of “lender of last resort” (or “backstop”) for banks in distress if the backup mechanisms already in place prove ineffective.

But some, including Chancellor Merkel, would like the fund to rival the Commission in its power to oversee national economies. This is opposed by the EU executive, which is loath to devolve power to national governments.

 

– No eurozone finance minister –

 

Macron proposed a finance minister for the 19-country eurozone with centralised powers over its economy, but the French leader remained vague about how the new position would work.

Jean-Claude Juncker’s European Commission then proposed to create a finance minister for the whole 28-nation EU by merging the vice-presidency of the commission and the presidency of the Eurogroup — the informal group that brings together the 19 finance ministers of the eurozone.

But wary of handing more power to Brussels, the Eurogroup ministers quickly rejected the idea last December by choosing to elect one of their own, Portugal’s Mario Centeno, for a two-and-a-half-year term.

 

– No eurozone parliament  –

 

It was one of Macron’s most ambitious ideas: A parliament specific to the euro area, responsible for controlling its decisions. But it already seems buried.

The French president watered down his already vague idea and the Germans and Juncker never took him up on it.

Macron’s even less ambitious idea to create transnational MEPs by using seats currently held by Britain has also run aground.