France, Germany to unveil eurozone reforms in March

Meeting without departure-bound Britain, the bloc’s 27 leaders were 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 for European Commission head Jean-Claude Juncker.

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

“We will find a common position because it is necessary for Europe,” Merkel said at a news briefing, speaking alongside Macron after a summit focused mostly on Brexit.

Merkel’s overture to France will rankle her conservative CDU party which toes an austerity-minded line on economic matters, but appeals to Social Democrats, with whom she must now build a coalition.

Reform of the eurozone is often blocked by political divisions, with rich countries — such as Germany and the Netherlands — reticent to adopt policies that share risks with their heavily-indebted eurozone partners, such as France, Spain, Italy or Greece.

The Netherlands pushed its austerity-driven vision of the eurozone at the summit, with Prime Minister Mark Rutte demanding reforms by overspending governments.

“I noticed that with a certain number of our colleagues that with the euro we always talk money… not how we can make our economies more competitive,” Rutte said after the talks.

Spanish Prime Minister Mariano Rajoy said that deepened integration of the eurozone would be “impossible” if not accompanied by a more unified tax policy.

“We need a real European budget with authority such as a European finance minister and also eurobonds,” Rajoy added, referring to the idea of joint borrowing by eurozone nations, a notion loathed by Berlin.

– ‘Large consensus’ –

Resistance to deep reform of the eurozone was confirmed in proposals last week by the European Commission, the executive arm of the EU, that put off the creation of a European finance minister until after European elections in 2019.

The original plan was for leaders to discuss a range of topics on Friday, with a further summit in June to table concrete decisions.

According to Tusk, who coordinates the summits, there exists a “large consensus” to create a European Monetary Fund that would function as a firewall to any new financial crisis and handle bailouts.

There is also support to complete the banking union, albeit at a very gradual pace.