French president Emmanuel Macron was in Berlin on Sunday to address the German parliament on the occasion of Germany’s remembrance day, the first French president to address German MPs in 18 years. His speech – in which he, again, called for more European cooperation – was loudly applauded by the politicians, who are not really used to such rousing words in their chamber.

Macron also had a small breakthrough to celebrate: France and Germany have finally come to an agreement on a euro-zone budget, due to launch in 2021 and a Franco-German paper on the subject will be presented to euro-zone finance ministers meeting on Monday.

Unfortunately for Macron, the joint paper released by both countries’ finance ministries indicate that his victory is more symbolic than substantial. The two countries agreed in principle to a budget last June, but detailed negotiations saw more conservative German ideas winning out.

Loss of trust

The French and Germans have been negotiating a euro-zone budget for some time, with many sessions going on into the early hours of the morning. Apparently, the French were frustrated with the German foot-dragging and at one stage, French finance minister, Bruno Le Maire, warned about a loss of trust. And the eventual compromise seems to have resulted in little to celebrate.

The original idea – that the euro-zone budget be used to stabilize European countries in crisis – barely gets a mention in the Franco-German paper, notes Lucas Guttenberg, deputy director of the Delors Institute, a German-French think tank focusing on Europe. “The unity was mainly around that central bit of progress. The overall impression is that this [new euro-zone budget] is interchangeable with the EU budget.”

The amount of the budget is yet to be decided. Macron had wanted one that equated with several percentage points of the euro zone’s total GDP, which would have equaled hundreds of billions of euros. But now his finance minister says that somewhere between €20-25 billion is a good enough “starting point”. That equals just 0.2 percent of the combined euro zone’s GDP.

Berlin also succeeded in making the new euro-zone budget part of the broader EU budget. This means the new budget will be subject to the same rules as the broader budget, German finance minister Olaf Scholz explained.

Rather than being used as a stabilizing force in times of crisis, the Franco-German paper now suggests a euro-zone budget be used mainly for investments, to help economically weaker regions and to improve EU competitiveness. Recipient countries would need to obey EU budget rules, which will please fiscally conservative EU members.

German resistance still strong

Although analysts have made noises to the contrary, sources close to the German government believe there is a good chance that all the euro-zone finance ministers will sign off on the new euro-zone budget when they meet on Monday. Final approvals must then be given by national leaders at the next EU summit, shortly before Christmas. And they need to be quick – if not approved, the budget could get stuck in the legislative queue, as Brexit and European parliamentary elections are sure to dominate the first six months of 2019.

Meanwhile some Germans are still arguing that the compromise does not make sense. This includes the economic council of Chancellor Angela Merkel’s Christian Democratic Union, or CDU. There are so many other vehicles for investment, says Wolfgang Steiger, the general secretary of the CDU’s economic council. “Studies indicate that risk sharing would be far better managed by strengthening cooperation between European capital markets, rather than by micromanagement through a centralized budget,” Steiger added.

All this will be something that the new CDU head, who will take Angela Merkel’s place at the top of the ruling party come December, will have to deal with. The current coalition government, featuring the Social Democrats and the CDU, agreed on a euro-zone budget during negotiations to form the government. But many center-right CDU members still regard it with suspicion, reflecting Germany’s generally conservative ways when it comes to what they perceive as funding other European countries with German wealth.

The fight to compromise on a euro-zone budget will go on and the French president continues to push hard for joint action. In his speech at the Bundestag over the weekend, Macron reaffirmed his belief in Franco-German cooperation as the engine of European reform. “What we have in common is much greater than our differences,” he reminded German politicians. Whether that counts when it comes to cold, hard cash is clearly another issue.

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