World Economy

Merkel rules out eased eurozone spending rules to help Macron

Stefan Wagstyl, Arthur Beesley & Duncan Robinson
German Chancellor Angela Merkel
Fabrizio Bensch | Reuters

Angela Merkel has dismissed the idea of helping Emmanuel Macron by relaxing eurozone spending rules, quickly putting the onus on France's next president to implement economic reforms after his election win.

A day after Mr Macron scored a decisive victory in France's presidential election, the German chancellor, the most powerful national leader in Europe, said she wanted to help France but said: "German support cannot replace French policymaking."

The chancellor pledged to help France fight unemployment and improve its economy, and to co-operate closely with the youthful president-elect. "Emmanuel Macron carries the hopes of millions of French people and also of very many people in Germany and in the whole of Europe," she said.

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But Ms Merkel said: "I don't see why — as a priority — we should change our policy."

Mr Macron's relationship with Germany is set to be one of the most important of his presidency, with both countries keen to revive the idea of a more powerful Franco-German motor in EU affairs.

His election win has led to renewed calls for Germany to support his reformist agenda and make his task more palatable in France by acquiescing in easing eurozone spending rules. Germany's strict stance on spending, and its own restrictive fiscal policies, have been criticised repeatedly by a number of European countries and by Ms Merkel's own junior coalition partners, the Social Democrats.

Sigmar Gabriel, the Social Democrat foreign minister, called on Sunday for an end to Ms Merkel's "financial policy orthodoxy" and said: "Whoever launches reforms [as Mr Macron plans] should not at the same time be forced into strict fiscal austerity."

However Ms Merkel's cautious message on Monday suggested that Berlin would be ready to allow Mr Macron more financial leeway only after he starts implementing reforms and after Germany's election in September. That would reduce the risks of a backlash from German voters opposed to potentially shouldering other countries' debts.

"What might happen is a policy change after the election," said a senior lawmaker in the chancellor's ruling conservative bloc. The chancellor is widely tipped to win a fourth term in office in September.Ms Merkel's officials on Monday excluded dropping their longstanding opposition to eurobonds, which would be common eurozone bonds jointly backed by member states. They were proposed by Mr Macron during his election campaign.

Mr Gabriel also proposed a French-German investment fund, without giving details. His spokesman later said this was "a political proposal" requiring further discussion. He and Ms Merkel's spokesman declined to say whether Mr Gabriel's statement had been agreed in advance with cabinet colleagues.

Norbert Röttgen, Bundestag international affairs committee chairman, told the FT: "If we can get economic reforms in France, it will be worth paying a price in terms of allowing greater economic flexibility [in the eurozone]." He said that Germany and France should soon launch some joint projects to emphasise their renewed co-operation — for example in foreign and security policy.Observers in Brussels said the president-elect must be able to show rapid progress on his domestic agenda to reinforce his credentials in Berlin. "If you see it now from the German perspective, there's

Observers in Brussels said the president-elect must be able to show rapid progress on his domestic agenda to reinforce his credentials in Berlin. "If you see it now from the German perspective, there's

"If you see it now from the German perspective, there's huge relief in Berlin that he became president but there still is a certain degree of fear that he won't be able to reform his own country," said Janis Emmanouilidis, director of studies at the European Policy Centre think-tank in Brussels.

The French leader would have to show progress by the time a new German government is in place at the end of the year, Mr Emmanouilidis said.

Mr Macron's team repeated his determination to ensure that Germany responded positively to his reform plans. Sylvie Goulard, a French liberal MEP who campaigned for Mr Macron, said Berlin's engagement with Paris had been reduced to a blame game in recent years. "Each of the partners has to take its responsibility. We have to take ours and they have to take theirs," she said.

Attention has already turned to parliamentary elections next month that will determine whether Mr Macron, whose En Marche! movement has no seats in the national assembly, can form a stable government.

Moody's, the credit rating agency, said En Marche! was unlikely to gain the 289 seats required for an absolute majority, meaning a cross-party "cohabitation" government was probable. "There is a very material risk that a period of cohabitation during a Macron presidency could prevent France from implementing policies that would address its growth and fiscal challenges," the agency said.