PARIS — For Emmanuel Macron, who is traveling to Berlin on Thursday, this could be a good moment to check the airbags.



The French president is meeting German Chancellor Angela Merkel to gauge whether or not his year-long effort to reform the eurozone will hit a wall of resistance in Berlin.

After his initial hopes that the new German government might be more open to his proposals, Macron is facing a harsh political reality: Merkel’s conservative base is hostile to even the lightest form of “fiscal transfer,” and her Social Democrat coalition partners are too weak to fight for their more eurozone-friendly ideas.

So the French president’s only hope of avoiding a painful experience lies in Merkel herself, who must decide whether or not to step in and tame her restless conservative base.

The prospects don’t look good.

There’ll be questions about whether the Macron-Merkel romance can survive the disappointment of a failed eurozone reform.

In a speech to her CDU/CSU MPs on Tuesday, the chancellor seemed to endorse many of the reservations and objections they had previously raised about a eurozone reform plan put forward by the European Commission, which incorporated many of Macron's ideas.

Much of the reluctance may have to do with domestic politics. The far-right AfD is competing with the conservative wing of the CDU to promise German taxpayers their money won't be used to finance spendthrift Southern Europe. But ahead of her talks with Macron, Merkel may want to show the French president that she can’t agree to all his demands.

“German parties’ statements have an impact abroad,” notes Lucas Guttenberg, a senior research fellow at the Delors Institute in Berlin. “And now the question is whether even a minimal reform can be achieved by June.”

For this to happen, France and Germany not only have to agree with each other, but they must also convince the other 17 members of the monetary union. For now, the “road map” they still insist they will unveil in June looks like a distant, anemic version of the grand plan Macron put forward last year.

From concessions to watering-downs, it will look at best incremental and at worst insignificant, said a French official familiar with the talks.

Northern resistance

France has long given up on the idea of giving the eurozone a proper budget with a so-called finance minister and acknowledged that for the moment, it looks more like pie in the sky.

Paris then switched attention to both strengthening the banking union and reforming the European Stability Mechanism, the eurozone's bailout fund, to give it an extra capacity to help countries facing temporary financial difficulties.

In addition, the June road map might also mention a small eurozone investment budget, possibly designed to help countries undergoing costly structural reforms in times of fiscal stress. It would “favor stability and convergence” among members, Macron said in his European Parliament speech this week, without saying much more.

But Germany is resisting a plan to implement a pan-eurozone fund to guarantee bank deposits to be backed up by the ESM. It is also insisting on keeping the current ESM governance, even though critics say its unanimity rules would prevent it from acting swiftly if a liquidity crisis hits a member country.

Berlin is also resisting the idea of making the ESM the backstop for the so-called resolution fund used to wind down failing banks.

In both cases, the funds would be financed by contribution from the banking sector. The ESM would only be called up in an emergency, in the unlikely case the funds would be depleted.

Noting that Germany had agreed in principle to a deposit guarantee scheme in 2012 when the banking union was launched, French diplomats are showing some frustration at what one called “the typical German duvet diplomacy.”

“It's death by slow smothering. They sign a deal and formally agree to something and then when the time comes to move ahead, multiply the conditions to implement it,” he said.

French officials often point out that it's French banks, not German ones, that might contribute more to both the deposit guarantee and resolution funds, considering the size of the country’s banking industry.

Even if he convinced Merkel to be bolder, Macron would have to deal with the reluctance of the eight northern countries which, following the Netherlands’ lead, signed a joint statement listing their reservations about the current reform plans, putting forward instead a traditional, fiscal-discipline-first agenda. They also insisted that talks had to “take place in an inclusive format” in a clear indication of the resentment the exclusive Franco-German relationship is creating among other eurozone members.

Limited expectations

Once a limited June road map is agreed, France doesn’t expect talks on further steps to resume any time soon, a government aide said.

“The big risk is that everyone turns the page and moves on to the supposedly bigger stuff — at least the stuff leaders really care about, like the European elections and the musical-chairs game of appointments to the top jobs,” he said.

And in 2019, he added, “the conservatives and the Euroskeptics will sweep the [European Parliament], so you can say goodbye eurozone reform for the next five years.”

“If Merkel proves too weak to fight along with us, there will be very lonely moments for Macron in Europe" — French diplomat

Then, there'll be questions about whether the Macron-Merkel romance can survive the disappointment of a failed eurozone reform.

Macron, after all, started his presidency on the assumption that Merkel was a strong leader and that all he had to do was convince her he was serious about reforming France and the rest would follow.

He also thought he could count on the support of Germany’s Social Democrats (SPD).

But both the chancellor and the SPD lost badly in the parliamentary election last fall, and their coalition government only came about after Merkel’s first, failed attempt to build one with the Greens and the liberal FDP.

Both the German and the Italian elections last month also showed that Euroskeptic parties are alive and well in the EU’s largest countries, and that Macron’s own election last year may have been an exception.

“We’ll keep fighting,” said the French diplomat. “But if Merkel proves too weak to fight along with us, there will be very lonely moments for Macron in Europe.”