Germany pours cold water on Macron's euro plan
Germany is proving less keen than France had hoped to share its wealth with poorer EU states.
That reluctance is likely to push back deadlines for French proposals on eurozone reform. It could even sink French leader Emmanuel Macron's flagship EU project, deepening Europe's north-south divide.
One French idea was to create a European Deposit Insurance Scheme (EDIS) to protect up to €100,000 of savers' deposits in any eurozone bank.
France wanted to press ahead at an EU summit in June, but German MPs were still "far, far away" from agreeing to use German money to underwrite the scheme, Ralph Brinkhaus, a senior lawmaker in chancellor Angela Merkel's centre-right CDU/CSU bloc told press in Berlin on Thursday (12 April).
"We are so far apart that hardly any results can be achieved at the EU summit in June," Brinkhaus said.
Another French idea was to transform the European Stability Mechanism (ESM), the EU's intergovernmental bailout fund, based in Luxembourg, into an EU institution called a European Monetary Fund (EMF).
But Brinkhaus said the ESM was "sufficient" as it was, adding, in a note of German austerity, that it should tie loans more strictly to creditor reforms.
He added that Germany would reject anything that looked like creating "euro bonds by the backdoor", referring to a European Commission idea to create a new EU "safe asset" as an alternative to sovereign debt.
"I think it's a fishy proposal," he said.
The MP noted that eight northern EU states, where the bloc's wealth is concentrated, shared his scepticism.
He also said German voters shared it. He noted that 60 German MPs had voted no to the latest Greek bailout back in 2015 and said the EU should focus on border control, competition policy, and the digital single market instead of monetary union.
Even more cold water was poured onto Macron's plan from Jens Weidmann, the head of the Bundesbank, and a top candidate to replace Mario Draghi as the chief of the European Central Bank next year.
Replacing the ESM with an EMF would not fly because it would give EU officials the power to levy national funds for future bailouts, he said.
"If this step would undermine the member states' existing right to have a say, it would have to be rejected because then liability and action would diverge – because it's the member states that are providing the guarantees for the risks taken by the ESM," Weidmann said in Berlin on Thursday.
In related ideas, Germany is also pushing the ECB to crack down on non-performing loans, in a move that could raise costs for banks in southern Europe, whose lenders hold mountains of bad debt.
The problem is the worst in Greece, where 46.7 percent of loans look like they will never be repaid. Portugal stands at 17.8 percent and Italy at 12.3 percent.
France's Macron unveiled his plan after Merkel formed a coalition with the less austere centre-left SPD party earlier this year.
They were meant to mark his arrival as a mover and shaker on the EU stage and to form the heart of Europe's political response to Brexit, which posed question marks on future EU integration.
They also went much further than the EDIS and the EMF, calling for a single eurozone budget that would be administered by the European Parliament and for the creation of a eurozone finance ministry in Brussels.
The humbling of Macron aside, Germany's position risks deepening the EU's north-south divide at a time when it is already struggling with an east-west divide over rule of law in Hungary and Poland.
"Time is running out," to agree on a euro-reform model, European Commission vice-president Valdis Dombrovskis told German daily Handelsblatt this week.
"What we need are concrete choices about how the combination of risk mitigation and risk sharing should look like," he said.
Klaus Regling, the German head of the ESM also warned against the "risk of political inaction" despite the harsh lessons of the 2008 financial crisis.
The next step in Germany will be for Merkel to agree how to proceed with Olaf Scholz, the SPD's finance minister in the new grand coalition.
Achim Post, the deputy head of the SPD, told the Reuters news agency on Thursday that his party still believed in Macron's "ambitious" proposals.
"These clearly include courageous steps to strengthen the economic and monetary union, for example through an investment budget for the euro zone or the establishment of a parliamentary-controlled European Monetary Fund," he said.
But he admitted that getting things done by June was an increasingly dim prospect.
"This certainly applies, in particular, to the establishment of a European deposit-guarantee scheme," he said, echoing Brinkhaus.