A Franco-German summit is to be held on Tuesday 19 June, against a backdrop of high tension for the German Chancellor Angela Merkel, despite its bucolic setting at Meseberg Castle, 70 km from Berlin.
Merkel, who is planning a private meeting with the French President, Emmanuel Macron, to last for more than four hours, is caught in the middle between her Conservative allies of the CSU and the Social Democrat branch of the government over refugees.
On the eve of the meeting, however, the French expressed optimism, hoping to present a roadmap for the Eurozone on the deepening of Economic and Monetary Union (EMU) and proposals on the question of migrants ahead of the European and Eurozone summits at the end of June.
“We have to conclude discussions on the details of the Eurozone summit on Tuesday”, an Elysée Palace source told us on Monday 18 June.
Bruno Le Maire, the French finance minister, and his German opposite number, Olaf Scholz, clarified outlines at a fresh bilateral meeting on Sunday. “There will, however, be important discussions between Merkel and Macron” on the subject, a source acknowledged.
The French consider that this Eurozone budget should have a stabilisation function, but also a convergence and investment function. In particular, it should have specific revenue and annual expenditure, rather than being fed into on an ad hoc basis. This orientation has still to be confirmed by Germany, which is stressing the need to avoid simple budgetary transfers.
This budget could be integrated in the overall EU budget. “This is an open question”, the Elysée source acknowledged. One thing is certain for Paris, on the other hand: “the decisions must be made between Nineteen and not Twenty-Seven”.
This orientation runs counter to the European Commission’s proposal of creating European investment stabilisation function, which will be open to other member states (see EUROPE 12031).
As regards financing, the fund would be fed into by national contributions, then an allocated tax (harmonisation of the corporate tax base, tax on digital platforms). For his part, Scholz favours the controversial financial transactions tax.
The question of how much is by no means resolved. In an interview with the Frankfurter Allgemeine Zeitung, Merkel spoke of sums in “double figures”. Macron is talking in terms of hundreds of billions of euro. “France and Germany are not going to post a magical figure” on Tuesday, as the most important thing is to have a trajectory, French diplomatic sources explained, but hope eventually for a prospect of several points of GDP.
On expenditure, the French remain vague, while German diplomats on Sunday evening stressed that the stabilisation mechanism would have to be made up of loans to be repaid once the economic situation becomes favourable once again. “A state’s contributions to the European budget could be suspended in the event of an economic shock and paid back, in some cases, over the very long term”, a French source commented.
Paris also hopes to reach an agreement on Tuesday on the future backstop of the Single Resolution Fund, the financial arm of Banking Union in the Eurozone.
“This will be a first step”, as Germany will not be ready to agree on a European deposit insurance system (EDIS), “either tomorrow or at the summit of 28 June”. The French consider that the most important thing is for the future backstop to allow the supervisor to make decisions quickly “in full respect of the German legal and constitutional mechanisms”.
Basically, as for the disbursements of tranches of aid to Greece, the Bundestag would have to be systematically consulted.
Again in the field of taxation, it is worth noting that Paris and Berlin are expected to announce a common position on corporate taxation. On the basis of a Franco-German common base, the aim is to make progress on the subject at European level within three years.
Proposals imminent on external bank of migration policy
France and Germany may present proposals on a mechanism to combine “efficiency and solidarity”, one source said. Work in these areas will cover the processing of asylum applications, returns of migrants without international protection and hosting solidarity.
“More ambitious” proposals will be forthcoming on the question of financing in the transit countries, such as Libya, or the countries of origin of the migrants, such as Niger and Chad, to inform and dissuade those considering making the journey.
Paris and Berlin are also in favour of reinforcing the capacity of the European border guard and coast guard corps (Frontex) to secure the external borders of the EU in terms of resources and rapid intervention capacity.
Nothing was said, on the other hand, about deportation mechanisms, a question central to the German government crisis.
In the military field, France and Germany are also expected to take note of progress in industrial cooperation the production of aircraft of the future and tank equipment. They consider that the future European intervention force made up of around ten member states should not call for a new institutional framework. (Original version in French by Nathalie Steiwer)