June 27, 2018 / 4:23 PM / in 22 days

France's Macron braces for resistance to euro zone overhaul at summit

PARIS (Reuters) - French President Emmanuel Macron expects tough talks as he seeks to persuade a dozen fellow euro zone members to stick with a Franco-German blueprint for a revamp of the single currency bloc.

FILE PHOTO: French President Emmanuel Macron delivers a speech in Quimper, France, June 21, 2018. REUTERS/Stephane Mahe

The French and German leaders nine days ago outlined the contours of deeper integration, agreeing on a euro zone budget and plans to push ahead with transforming the European bailout fund (ESM) into a European Monetary Fund with widened powers to monitor countries’ fiscal performance.

Macron and Chancellor Angela Merkel hailed the Meseberg roadmap as “a new chapter” for the currency union, but have faced a backlash from more than half the euro zone’s member states over the need for the euro zone to have a common fiscal capacity.

Both have been at pains not to present their accord as a done deal.

“The Meseberg agreement is an essential contribution, it doesn’t end the conversation,” a French presidency official told reporters ahead of a June 28-29 summit of EU leaders.

“It is not an easy debate,” the official added.

Faultlines among euro zone finance ministers opened up at a meeting in Luxembourg last week, after which Dutch Finance Minister Wopke Hoekstra wrote to Mario Centeno, president of the Eurogroup, on behalf of the 12 skeptical countries.

Hoekstra underscored that “wide divergences” existed on the need for a euro zone budget. “There was clearly no consensus on starting to explore options, as well as financing sources such as the FTT (Financial Transaction Tax),” he wrote in his correspondence seen by Reuters.

Paris and Berlin also want a new ESM to be able to extend a credit line with no strings attached to countries experiencing an economic shock, provided they have been observing EU rules that limit the size of deficit and debt.

Writing on behalf of counterparts from Belgium, Austria, Denmark, Finland and Ireland among others, Hoekstra noted that numerous ministers at the Luxembourg meeting stressed the need to maintain strict conditions for all ESM instruments.

France and Germany say the reforms are needed to help the euro zone better cushion its members from economic shocks.

“Mr Centeno has sought ‘guidance’ from the European Council on whether or not to keeping working on these topics. Our wish is that they all remain on the table,” the Elysee official said.

“The summit will not be the end of the conversation.”

Reporting by Richard Lough and Jean-Baptiste Vey; Editing by Toby Chopra

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