The German Finance Minister Wolfgang Schaeuble is drafting a plan that would allow states of the Eurozone’s southern periphery to tap into European Stability Mechanism (ESM) funds to invest in times of crisis, the Bild tabloid reports.

The Greek press hailed the news as a signal of investment. But, the German government was nodding to Paris, not Athens.

The notion of countercyclical investment during recessions is a policy turning point for Germany. More vehemently than anyone else, Schaeuble has opposed any form of fiscal transfers within the monetary union for the best part of the decade. However, Emmanuel Macron is moving towards the opposite trajectory, noting that the political consolidation of the Eurozone is a precondition for its continued existence. And Germany’s priority is, once again, the Franco-German axis.

Reforming the Eurozone

During the French electoral campaign in May, Macron’s chief economic advisor Jean Pisani-Ferry told the newspaper Die Zeit that Germany’s idea that “others” want its money has clouded its view on the need for Eurozone integration.

The man who drafted Emmanuel Macron’s electoral platform said that “more Europe” means an independent budget and a finance minister for the Eurozone, public investment, a banking union, and new crisis management instruments. The first institutional tool he envisaged towards that end was the conversion of the European Stability Mechanism (ESM) into a monetary fund modeled after the IMF.

Germany is the biggest contributor of ESM funds. But, taking this step to meet France half way may be the least politically costly step. The notion of a common budget and a banking union entail a degree of debt mutualisation, which Germany has fiercely resisted. In May, Pisani-Ferry said that the time for such changes would be “after the elections in Germany in September, at the latest.”

For his part, Macron has made clear that French economic reform is part of the package. High on the German political agenda is fiscal discipline, with Berlin seeking a veto on national debt and budgets, which should hand in hand with financial transfers. The same arrangement goes without saying in countries that have been bailed out, like Greece, Portugal, and Ireland.

The ESM plan

Bild’s article is unsourced, but the article’s publication just as Macron is expected to visit Athens may be telling. In fact, Bild says that the German leak is a “goodwill gesture” from Berlin to Paris. When Macron does visit Athens, he will have something concrete in his hands in making the case that the union is moving towards political integration. At the end of the tunnel, Greeks may continue to hope for debt mutualization, although such hopes don’t fly in Germany.

At the end of the tunnel, Greeks may continue to hope for debt mutualization, although such hopes don’t fly in Germany.

Staying on the script, Bild suggests that the finance minister would have preferred to publish the plan after the German elections on September 24. The next big step, according to Reuters, is a complete banking union by 2019.