Germany and France to present differing reform agendas at Euro Summit

EPA-EFE/CLEMENS BILAN

German Chancellor Angela Merkel (R) and French President Emmanuel Macron at a bilateral meeting at the G7 summit in Charlevoix in Canada June 8, 2018.

Germany and France to present differing reform agendas at Euro Summit


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With the EU summit just over two weeks away, it is becoming abundantly clear that no common Franco-German vision for the future currently exists.

The agenda at the June 28-29 summit will include a number of highly contentious topics, including the fact the UK will go to Brussels without a White Paper on how it envisions post-Brexit relations with the bloc.

The agenda will, however, focus on the future of the EU against a backdrop of rising populism and Euroscepticism, as well as the new anti-establishment Italian government and forthcoming European elections.

Clashing visions for the Eurozone

France wants Germany to take significant steps towards the further economic integration of the Eurozone in the hope that it will reduce systemic political and economic volatility. Paris’ view is in direct opposition to that of their counterparts in Berlin, who view the Eurozone as a primarily normative construct that can be operated through intergovernmental cooperation alone.

French President Emmanuel Macron wants nothing less than a Eurozone budget funded by EU-wide taxation and no longer be funded by 1% of national contributions alone. France has advocated an EU-wide corporation tax, an initiative that Germany vehemently opposes although as the biggest economy it would contribute more. The proposal is likely to be quickly shot down by a number of the Member States from Ireland and Malta to Luxembourg and the Netherlands, all of whom favour EU-wide competition on corporate taxation.

In an attempt to bridge the Franco-German gap, the European Commission is trying to lay the ground for a compromise. In late May, the Commission presented a proposal for the introduction of sovereign-bond-backed securities (SBBS). SBBSs would be “securities” issued against a pool of sovereign Eurozone bonds – of higher and lower risk – depending on investor appetite. SBBSs are not “Eurobonds” but “securities” that reduce risk rather than redistribute it.

Germany leads a group of countries with Austria, the Netherlands, and Finland that are net contributors to the EU budget. The group views SBBSs as covert Eurobonds, as the markets may opt for “securities” instead of national bonds.

When it comes to economic governance, the single point of consensus between Paris and Berlin appears to be the emergence of an EU Monetary Fund. For Germany, this would be an institutionalised crisis-management mechanism that would invest during economic downturns to promote growth and target sectors that bolster productivity such as technology and innovation.

It is important to consider that this would, however, be a small fund compared, for instance, with the European Stability Mechanism (ESM).

Opposite views on defence

When it comes to defence and security, Berlin wants to retain its image as a non-belligerent actor rather than hone the idea of an emerging superpower, while France wants to be the preeminent military power leading the EU.

German Chancellor Angela Merkel wants to revisit the proposal of turning the Frend seat as a permanent member of the UN Security Council into an EU seat. She would also like to see the EU Security Council operate on a rotational basis instead of being dominated by the US, UK, Russia, France, and China – its five permanent members.

Macron, however, wants France to retain its independent UN Security Council seat, while developing an integrated military force that will be able to engage in peacekeeping missions abroad that would include UK troops, even after the United Kingdom withdraws from the EU in March 2019. Merkel is willing to see the emergence of an EU force, but not one that would be engaged in international that could call for offensive uses of force.

Partial Agreement on institutional reform

On an institutional level, both Macron and Merkel have agreed that the European Commission should be reformed. They both want a smaller executive that would be subject to a rota system rather than each state picking a commissioner. To achieve this, both Berlin and Paris are willing to accept a “no exception” rule, which means the larger Member States could find themselves without any representation in the EU executive.

Merkel has called for the European Commission President to be elected directly from a list of candidates, in a process that cannot be vetoed by any of the Member States. For his part, Macron is not wholeheartedly behind this idea.

Consensus on migration management

There is some consensus between Paris and Berlin over managing the migration situation in the EU, which will likely alienate a number of the Member States. Led by right-wing governments in Hungary, Slovakia, and Poland, the anti-immigration bloc within the EU is in a combative and emboldened mood after like-minded governments in Austria, Slovenia, and Italy have recently come to power. They are looking to directly challenge the Franco-German consensus on migrant issues, with the hope of halting, and possibly returning, the scores of illegal immigrants that have flowed into the EU since 2015.

Merkel and Macron want the Member States to fully integrate their databases and work with the migrants’ countries of origin to help determine their status by having better access to their background information. Both Paris and Berlin have also talked about a possible “Marshall Plan” for the African continent and creating a legal migration channel. Both leaders also said they want to see Frontex, the European Border and Coast Guard Agency, evolve into a fully-fledged EU border police so it can act as a one-stop shop for the management of asylum applications.

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