Insight
Is Macron becoming isolated in Europe? by Charles Grant 13 June 2018
Macron thinks the EU is not viable without radical reform. His priority is to reshape the eurozone, but Germany is blocking his bolder ideas. He risks isolation in Europe, which could weaken him at home. In a series of speeches during his first year as French president, Emmanuel Macron has not only sought to define grand concepts like ‘European sovereignty’ and ‘a Europe which protects’, but also proposed dozens of specific initiatives, ranging from an innovation agency, to a carbon tax, to an intervention force. He has taken a special interest in the eurozone, which he believes is unsustainable in the long term without much more federal governance. Macron has had a clear plan for achieving that goal. First, reform the French economy, to regain credibility with Berlin; during the presidency of François Hollande, France’s weakness made the Franco-German relationship unbalanced. Then, persuade Germany and the other key members to build a stronger eurozone. The first part of the plan has worked quite well. Macron has carried out a major reform of France’s labour markets, and also tackled training, unemployment insurance and some parts of the education system. He has cut taxes on companies, investment income, wealth and employment, in an effort to boost investment. He is currently busy with railway reform and has many other ideas in the pipeline. The problem is with the second part of the plan. Macron wants to strengthen the banking union by beefing up the European Stability Mechanism (ESM), the EU’s under-powered bail-out fund, and making it a backstop for the Single Resolution Fund for banks. He supports the European Commission’s plans for a pan-European scheme for insuring bank deposits. He wants a eurozone budget – distinct from the EU budget – of “several percentage points” of GDP (his officials would be happy with 1 per cent). In the longer term he wants a European finance minister, with decision-making powers, responsible to a eurozone parliamentary body. But reforms in France have not made the Germans willing to dance to Macron’s tune. Last year, the feeling among some top officials in Berlin was that they needed to give Macron something, to strengthen his position vis-à-vis France’s eurosceptics. This year the mood is different. As one Berlin official put it, CER INSIGHT: Is Macron becoming isolated in Europe? 13 June 2018
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