Macron piles on the pressure as Germany puts on the brakes: E(M)U in search of reform

French President Macron is not only persistently urging reforms at home, he is also at the spearhead of renewals in Europe. In Strasbourg, he again chose the European Parliament as the grand stage for promoting his idea of a democratic but also solidarity-based Europe that would to some degree be state-controlled economically. Most importantly, the social liberal Macron wants to strengthen the European institutions and is pledging greater financial commitment on the part of his country – also to cope with the consequences of the refugee crisis, which remain a huge challenge for the Community, and to counter the autocratic tendencies in parts of Europe. The euro zone is also to be strengthened both at the institutional level, by transferring the ESM into a European Monetary Fund (EMF) and completing the banking union, as well as at the financial level by providing it with a budget of its own. Above all the demand for more money for Brussels as well as the curtailment of national competences faces opposition, particularly on this side of the Rhine, with many fearing the introduction of a transfer union.

While Macron has been promoting his ideas for quite some time now, Berlin is still in the process of defining which political direction to take after months of limbo. Opinions within the grand coalition on the Europe issue still diverge greatly. While the SPD is largely in agreement with Macron, opposition is growing within the CDU/CSU. Although the CDU/CSU explicitly supported the notion of a European Monetary Fund (EMF) during the election campaign, fears are now being voiced that an EMF of this kind would operate less as a supervisory body for states unwilling to reform and be used more as a political instrument for offering financial support to Southern Europe. The demand to withdraw the EMF from the control of national parliaments and install a European finance minister with own budget responsibility is viewed in a particularly critical light – as is the completion of the banking union which, as the Union parties claim, poses a higher risk for German taxpayers in its current form as a collective deposit guarantee fund.

And what is the position of the Federal Government as represented by the Chancellor? So far, the Berlin officials have remained silent. Merkel is obviously in a dilemma. On the one hand, it should be clear that with Brexit the majority relations in the EU have shifted in favour of the countries advocating a Europe based on financial solidarity. What’s more, in the past money has already proved an effective means of uniting Europe. By equipping Europe with better financial resources, the situation of the Southern European states hit by the social consequences of the sovereign finance crisis could be alleviated and the nerves of the increasingly EU-critical states of Eastern Europe be calmed. On the other hand, ideas that bloat European institutions even further are unpopular among both the conservative parties as well as large sections of the German population. Additionally, the CSU faces a difficult state election in Bavaria in October of this year and does not want to provide the AfD with a golden opportunity to strengthen its base.

Nonetheless, time is of the essence. Results are to have already been reached by the EU summit in June, and European elections are scheduled for mid-2019. By then at the very latest it should be clear which direction E(M)U wants to take. It should therefore come as no surprise if Germany and France were to hold negotiations on the basis of Macron’s proposals. The end result could be a compromise that would require Germany to make a greater financial commitment and would provide Europe with greater competences. In return, Berlin will most likely press for stricter control mechanisms – in the hope that these prove more effective than the previous ones.

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