Hard nein

German economists scoff at Macron’s euro-zone reform proposals

germany, euro zone, reform, economists
Betting on a transfer union. Source: DPA

French President Emmanuel Macron is struggling to find supporters for his euro-zone reform plan in Germany. Despite the two countries being close partners historically and in European Union affairs, his proposals are being refuted not only by influential German politicians, but now also by leading economists in the country.

The majority of 129 German financial experts surveyed by the Ifo Institute for Economic Research and Frankfurt Allgemeine Zeitung newspaper rejected his ideas for increasing stability of the monetary region.

According to the study, around 58 percent opposed establishing a euro-zone finance minister and 60 percent were against a designated euro-zone budget. If a finance minister role were to be created, 62 percent of the polled economists said its main task should be monitoring compliance with budgetary rules.

Experts fear Germany could end up paying for weaker members under a shared budget. In what would amount to a “transfer union,” Europe’s richest country could end up getting stuck with the onus of subsidizing bad debt.

“A euro finance minister would need a budget and competences,” said Niklas Potrafke, director of the Ifo Center for Public Finance and Political Economy. “This would be a step toward a transfer union, which is what we don’t want.”

Fifty-eight percent of German economists also opposed an annual €4 billion ($4.7 billion) fund, supplied by the European Commission, to address one-sided economic shocks.

“Politicians need to decide whether they want a United States of Europe or a return to the Deutsch Mark,” argued Andreas Peichl, a senior researcher at Ifo, on the other hand. “A currency union will not work without further integration and insurance against asymmetrical shocks.”

Earlier this month Chancellor Angela Merkel’s ruling Christian Democratic Party also took first steps to kibosh Mr. Macron’s proposals. The chancellor and French president had hoped to agree on reforming the euro zone ahead of a summit in Brussels in June.

Barbara Woolsey is an editor for Handelsblatt Global in Berlin. To contact the author: b.woolsey@extern.handelsblattgroup.com

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