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Merkel wants European Monetary Fund with national oversight: sources
Thomson Reuters
By Andreas Rinke and Paul Carrel
BERLIN (Reuters) - German Chancellor Angela Merkel backs the idea of a European Monetary Fund, provided national governments have sufficient oversight, sources close to her said before a visit by the French president.
President Emmanuel Macron, who will meet Merkel in Berlin on Thursday, is pushing hard for bold euro zone reforms to defend the 19-member currency bloc against any repeat of the financial crisis that took hold in 2009 and threatened to tear it apart.
His vision includes turning Europe's existing ESM bailout fund into a European Monetary Fund (EMF). At one point, Macron also suggested the zone should have its own budget worth hundreds of billions of euros, an idea that does not sit well with Germany.
Merkel told lawmakers from her conservative bloc on Tuesday that she favored the EMF concept as long as member states retain scrutiny over the body, participants at the meeting said.
"It's not that one side is putting the brakes on and the other pushing ahead," one of the participants at Tuesday's said. "We want to find a good reform path together."
German conservatives worry that an EMF could fall under the purview of the European Commission and could use German taxpayers' money to fund profligate states. They also fear the Bundestag, Germany's lower house of parliament, would lose its ability to veto euro zone aid packages.
A succession of bailouts for Greece aroused stiff opposition in Germany, although the Bundestag approved them all.
Merkel told the meeting that an EMF should be incorporated into European law via a change in the EU treaty, though she did not make this a stipulation for creating it, participants said.
European treaty change is a tricky feat that could take time to achieve, but by not categorically insisting on it Merkel leaves wiggle room for her talks with Macron.
The chancellor's remarks to her parliamentary bloc tread a careful line between Macron's drive for bold euro zone reform and her conservatives' push to retain scrutiny of any EMF.
One participant said Merkel wanted an EMF to act with conditionality - the same approach taken by the International Monetary Fund, which attaches strict reform conditions to aid.
In line with leading members of her conservatives in parliament, she also rejected plans floated by the European Commission to make use of a specific EU legal provision to develop the existing euro zone bailout fund into an EMF.
Merkel, whose political capital is depleted after she lost support in last September's national election, faces fierce resistance from her conservatives to any reforms that would see German taxpayers assume liability for other countries' debts.
Her coalition partners, the left-leaning Social Democrats (SPD), sympathize with Macron and want him to be rewarded for his efforts to reform the French economy, well aware that a large chunk of French voters remains susceptible to far-right and far-left populists skeptical about the EU.
(Reporting by Andreas Rinke and Paul Carrel; Editing by Madeline Chambers; editing by David Stamp)
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