April 18, 2018 / 11:07 PM / in 3 months

Merkel urges compromise, Macron wants solidarity on euro zone reforms

BERLIN (Reuters) - Germany’s Angela Merkel called for a spirit of compromise on reforming the euro zone at a meeting on Thursday with French President Emmanuel Macron, who pressed for solidarity among members of the currency union.

Before their talks, the two said they would present a united front at June meeting of European Union leaders on a range of issues including reform of the 19-member euro zone, which Merkel said they agreed was “not yet sufficiently crisis-proof”.

France and Germany, which account for around 50 percent of euro zone output, are essential to the reform drive.

Stressing the need for compromise, Merkel said: “We each bring some different facets but I think the sum of our proposals will make for a good result in the end.”

However, their meeting took place against a backdrop of grumbling by lawmakers from Merkel’s conservative bloc, wary that Macron’s call for more solidarity could see German taxpayers’ money used to fund profligate member states.

“No monetary union can exist without elements of convergence,” the French leader told a news conference with Merkel in the German capital before their talks.

“The most important thing is not to react on such and such instrument at this stage, but to be sure that we share the same goals and to have a joint political objective,” he added.

At pains to present a united front despite their underlying differences and distinct styles - Merkel’s cautious, no-nonsense approach contrasts with Macron’s bold rhetoric - they stressed they would tackle a range of issues, including migrant policy.

Macron reiterated a proposal made at the European parliament to subsidize local authorities who welcomed refugees.

“We can’t let this or that country alone carry the burden of hosting and integrating (migrants),” he said.

On a European asylum system, Merkel said the two leaders agreed on many points, and concurred that offering incentives was a better approach than talking about penalties.

EURO ZONE REFORM

Macron’s vision also includes turning Europe’s existing bailout fund into a European Monetary Fund (EMF), to act as a buffer in any future financial crises in the bloc, which was nearly torn apart in a debt crisis that took hold in 2009.

German Chancellor Angela Merkel and French President Emmanuel Macron hold a news conference at the building site of the Humboldt Forum in Berlin, Germany, April 19, 2018. Kay Nietfeld/Pool via Reuters

He has also suggested the euro zone have its own finance minister and, at one point, floated the idea of a budget for the currency bloc worth hundreds of billions of euros.

Germany’s Social Democrats (SPD), Merkel’s junior coalition partner, sympathize with Macron’s call for solidarity. They want him to be rewarded for efforts to reform the French economy, well aware that a big chunk of French voters remain susceptible to far-right and far-left populists skeptical about the EU.

But Merkel’s larger conservative bloc insists on what they call the principle of ‘liability’, whereby individual member states carry responsibility for their own economic risks.

Merkel said she was very optimistic about completing a banking union. Berlin’s focus has long been on banks first reducing the risks they take in lending.

“We are also ready, perhaps not in the immediate future but in the longer term, to agree on a common deposit guarantee system,” said Merkel. “But we want liability and risks to be kept together.”

Underlining a sense of urgency for reform in Brussels, European Commissioner for Economic and Financial Affairs Pierre Moscovici warned momentum could be lost for deepening euro zone integration if decisions are not taken at the June summit.

“We are some way from reaching a consensus on the priorities and method for moving the euro area forward and time is running out,” Moscovici said in a speech at the Peterson Institute for International Economics in Washington.

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Additional reporting by Madeline Chambers and Thomas Escritt in Berlin and by Michel Rose in Paris; Editing by Richard Balmforth

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