France, Germany to Unveil Eurozone Reforms in March

Germany and France will offer their joint vision for reforming the eurozone by March, German Chancellor Angela Merkel said on Friday, in an effort to bridge divisions over the future of the single currency.

Meeting without departure-bound Britain, the bloc’s 27 leaders were tasked by E.U. President Donald Tusk to speak freely about their often clashing visions for the single currency’s future at a summit widely expected to be dominated by Brexit.

Overhauling the eurozone and making it more resilient to economic shocks has been a top priority of French President Emmanuel Macron, as well as European Commission head Jean-Claude Juncker.

But these ambitions have been stymied by political uncertainty in Germany, where Macron-ally Ms. Merkel is still trying to form a government after the pro-business FDP party abandoned talks amid doubts about eurozone reform.

“We will find a common position because it is necessary for Europe,” Ms. Merkel said at a news briefing, speaking alongside Mr. Macron after a summit that was dominated by Brexit.

LIVE | Avec Angela Merkel à Bruxelles au terme du Conseil européen. #EUCOhttps://t.co/8f7JEh1GHO

— Emmanuel Macron (@EmmanuelMacron) December 15, 2017

Ms. Merkel’s overture to France will rankle her conservative CDU party, which toes a austerity-minded line on economic matters.

Reform of the eurozone is often blocked in a political split, with rich countries — such as Germany and the Netherlands — reticent to adopt policies that share risks with their heavily-indebted eurozone partners, such as France, Spain, Italy or Greece.

The Netherlands pushed its austerity-driven vision of the eurozone at the summit, with Prime Minister Mark Rutte demanding reforms by overspending governments.

“I noticed that with a certain number of our colleagues that with the euro we always talk money… not how we can make our economies more competitive,” Mr. Rutte said after the talks.

The resistance has so far blocked Mr. Macron’s idea of a eurozone budget and held up the creation of a Europe-wide deposit insurance scheme, the last remaining pillar of the banking union.

“To us, it is more important to make some member states more resilient for the next financial crisis,” an E.U. diplomat said.

The loss of momentum was confirmed in proposals last week by the European Commission, the executive arm of the E.U., that put off more ambitious ideas, such as the creation of a European finance minister, until after European elections in 2019.

The original plan was for leaders to discuss a range of topics on Friday, with a further summit in June to table concrete decisions.

According to E.U. President Donald Tusk, who coordinates the summits, there exists a “large consensus” to create a European Monetary Fund that would function as a financial firewall to any new financial crisis and handle bailouts.

There is also support to complete the banking union, albeit at a very gradual pace.