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Would-be Merkel successor warns against EU 'transfer union'

BERLIN (Reuters) - The European Union must be careful not to become a “transfer union” in which richer member states are asked to bankroll their poorer peers, a leading candidate to succeed German Chancellor Angela Merkel told Reuters.

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Friedrich Merz, a lawyer and former leader of the parliamentary faction of Merkel’s Christian Democrats (CDU), said the EU was walking a “very fine line” with financial rescue packages now under discussion.

He was referring to a proposal made by France and Germany for a 500 billion euro ($548 billion) Recovery Fund that would offer grants to EU regions and sectors hit hardest by the coronavirus pandemic.

Merz said that when, as a member of the European Parliament and Germany’s Bundestag, he had agreed to Economic and Monetary Union (EMU) he promised voters that it would not become a European transfer union.

“I feel bound by this promise - also in order not to give the opponents of Europe arguments that can be misused in the next federal election campaign,” he told Reuters in the interview published on Thursday.

Merz’s comments highlight the wariness in Merkel’s party about the Recovery Fund proposal she has put forward together with French President Emmanuel Macron. The opposition Free Democrats and the Alternative for Germany (AfD), a far-right party, oppose the plan.

Merz welcomed the initiative and said Germany had an interest in a functioning European internal market.

“But the devil is in the detail,” he added, calling for checks to the proposal for the European Commission to borrow money on behalf of the whole EU, in order to make sure it is compatible with EU law.

“If necessary, the treaty must be amended,” he said.

The new CDU leader, set to be chosen in December, will be in pole position to run as chancellor in the next federal election due by October 2021, as Merkel has said she will not seek a fifth term.

So far, the top contenders to lead the party are Merz, a former Merkel rival who is popular on the right of the party, and Armin Laschet, the premier of Germany’s most populous state. Foreign policy expert Norbert Roettgen is an outsider.

Merz also said he was concerned about a setback for Europe’s industrial companies during the coronavirus pandemic due to ill-designed rescue policies.

“If Europe is not careful, China and the United States in particular will emerge stronger from the corona crisis,” he said.

“My great concern is that what happened to Europe’s banks after the euro crisis will happen to Europe’s industrial companies - that after the crisis they will fall behind the competition from the United States and China,” he added.

Writing by Paul Carrel; Editing by Hugh Lawson