Merkel + Macron

The Grand Alliance

main 86509391 Reuters – Merkel Macron July 13 2017 Elysee Palace Paris
Can their relationship survive tax talk? Source: Reuters

French President Emmanuel Macron and German Chancellor Angela Merkel meet in Paris today, along with their most important ministers, to present a road map to lead the continent to overcome the self-doubt that has brought the European project to a standstill.

They will address defense and security, but the focus of the talks will be on fiscal and economic policy. The French and German finance ministers, Bruno Le Maire and Wolfgang Schäuble, will present plans for the harmonization of corporate taxation, Handelsblatt has learned from sources close to the talks.

The central pillar will be a concept for a common corporate tax base, details of which are to be finalized by the end of the year so it can be implemented in 2018, preferably by all EU members but if necessary as a bilateral move, reflecting the leaders’ determination to make progress even if that means members advancing at different speeds.

The two ministers also want to agree on plans by the end of the year for a minimum tax rate for company earnings in Europe, to ensure that digital companies such as Google are paying taxes everywhere they do business, not just in low-tax member states where they set their headquarters.


Video: Economist Clemens Fuest on Mr. Macron’s reform ideas.

The plan to strengthen the euro zone will take longer and is a “medium-term” project, officials in Berlin and Paris said. That suits Ms. Merkel, who is campaigning for a fourth term in the September general election and who doesn’t want to expose herself to accusations that she’s going to bankroll the continent yet again.

Mr. Macron’s call for deeper integration is viewed with some suspicion in bailout-weary Berlin, where his idea of a euro zone budget is seen as opening the door to a permanent transfer of funds to weaker euro nations.

Ms. Merkel and Mr. Schäuble haven’t ruled out moves to strengthen the euro zone, but Berlin and Paris are still far apart on this issue. While the French are talking about more common debt and and new budgets, the Germans are pushing for stricter controls.

Supplementary help that would be largely financed by northern European countries must go hand in hand with efforts made by the southern European countries in return, the German Finance Ministry said in a proposal paper. For example, payments from EU structural funds would be made conditional on recipient nations implementing reforms recommended by the EU Commission. Mr. Schäuble wants to persuade Mr. Le Maire to back that plan.

The countries will also discuss Mr. Schäuble’s plan to turn the European Stability Mechanism bailout fund into a European Monetary Fund. The idea is for any future crises in the euro zone to be handled by a European Monetary Fund instead of the International Monetary Fund, which has quarreled with the EU over the latest bailout of Greece, demanding debt relief that it says is essential for Greece’s economic recovery. France no longer opposes the idea of a European Monetary Fund, but it wants avoid weakening EU institutions.

The French and German defense ministers, Florence Parly and Ursula von der Leyen, will also have much to discuss after EU leaders agreed in June to start funding military research with the EU budget and to built up joint defense capabilities.

The French government said there would be “strong messages on bilateral projects.” It’s unclear if that refers to more cooperation on defense projects or joint missions. The meetings will only last three or four hours, followed by a lunch at 12:30 p.m. At the end of the talks, each pair of ministers will have a detailed program to work on in the coming months.

 

Martin Greive is a correspondent for Handelsblatt based in Berlin. Thomas Hanke is Handelsblatt’s correspondent in Paris. Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin and is deputy managing editor of Handelsblatt’s Berlin office. To contact the authors: hanke@handelsblatt.com, greive@handelsblatt.com and hildebrand@handelsblatt.com.

We hope you enjoyed this free article.

Subscribe today and get full access to market-moving news in Europe's leading economy.