EU leaders split on French president-inspired eurozone overhaul

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December 15, 2017 2:56 AM

EU leaders will wrangle over ways to forge a stronger eurozone on Friday, with hopes of sweeping reforms dashed by political limbo in Germany and waning interest.

Meeting without departure-bound Britain, the bloc's 27 leaders have been tasked by EU President Donald Tusk to speak freely about their often clashing visions for the single currency's future at a summit widely expected to be dominated by Brexit.

Overhauling the eurozone and making it more resilient to economic shocks has been a top priority of French President Emmanuel Macron, as well as European Commission head Jean-Claude Juncker.

But Macron's ambitions have been stymied by political uncertainty in Germany, where a weakened Chancellor Angela Merkel is still trying to form a government after the pro-business FDP party abandoned talks amid doubts about eurozone reform.

In the eurozone's usual political split, rich countries led by austerity-minded Germany are reticent to adopt policies that share risks with their heavily indebted eurozone partners, such as France, Spain, Italy or Greece.

"When it comes to European monetary union, the divide is -- and sorry for this geographical simplification -– between north and south," said Tusk as he arrived for the first day of the two-day summit.

The resistance has blocked Macron's idea of a eurozone budget and held up the creation of a Europe-wide deposit insurance scheme, the last remaining pillar of the banking union.

"To us, it is more important to make some member states more resilient for the next financial crisis," an EU diplomat said.

'Large consensus'

The loss of momentum was already made clear in proposals last week by the European Commission, the executive arm of the EU, that put off more ambitious ideas, such as the creation of a European finance minister, until after European elections in 2019.

The idea is to discuss a range of topics on Friday, with a further summit in June to table concrete decisions, though even this seems ambitious given the uncertainty in Berlin.

According to Tusk, there exists a "large consensus" to create a European Monetary Fund that would function as a financial firewall to any new financial crisis and handle bailouts.

There is also support to complete the banking union, he added.

French Minister Bruno Le Maire this week indicated that France had accepted the delay in achieving Macron's vision, with the proposals for a eurozone minister and budget only a "last step" on a long path to reform.

But on the sidelines of the summit, a French official denied any "lack of ambition".

"We must use the next six months to reach agreement -- particularly France and Germany -- which can then spur movement," the official said.

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