Le Maire Tells Germany It's Now or Never to Strengthen Euro Zone

© Bloomberg. Bruno Le Maire, France’s finance minister, speaks during a Bloomberg Television interview at the spring meetings of the International Monetary Fund (IMF) and World Bank in Washington, D.C., U.S., on Friday, April 20, 2018. The IMF said this week the world’s debt load has ballooned to a record $164 trillion, a trend that could make it harder for countries to respond to the next recession and pay off debts if financing conditions tighten.

(Bloomberg) — French Finance Minister Bruno Le Maire has a message for the German government on reform in the euro area: “It is now or never – jetzt oder nie.”

After more than eight hours of tough talks with his counterparts from the Group of Seven that focused mostly on a trade dispute with the U.S., Le Maire found some time to reiterate — in German — his call on Chancellor Angela Merkel to move forward with reforms. His channel of choice: journalists from Germany’s biggest newspapers who accompanied Finance Minister Olaf Scholz to a ski resort in Whistler, Canada.

“We can’t only rely on monetary policy and quantitative easing to deal with potential future crises in the euro zone and we have to bid on something new, and that is a common fiscal capacity, if we want to reinforce stabilization and the convergence among the 19 member states,” Le Maire told reporters Friday. “We need to agree together on a clear and ambitious approach. We can’t satisfy ourselves with a kind of loose consensus, something that won’t be clear, won’t be ambitious and stays on the same lines.”

Efforts are focusing on reaching a deal by late June on two key aspects of the euro area: beefing up the bloc’s bailout fund and completing the so-called banking union through the establishment of a backstop for a fund to help wind down failed banks and, crucially, a common deposit insurance scheme.

While there is consensus on the first two, significant disagreements persist on the latter, as hawkish countries such as Germany and the Netherlands are reluctant to take steps that they say would put their taxpayers on the hook for risks lurking in balance sheets of vulnerable banks across the bloc.

For Le Maire, time is of the essence, and a joint ministerial meeting set for June 19 a de facto deadline to find agreement ahead of an EU summit at the end of the month — before state elections in Bavaria and preparations for a European parliament election divert attention.

While Merkel herself shares the sense of urgency transmitted by the French — she aims for “important, key decisions” and told German lawmakers last month that governments must step up efforts to integrate the euro area because European Central Bank stimulus won’t last forever — she’s constrained by fiscal conservatives in her own ranks. Members of the Christian Democratic-led bloc have rejected some of the French proposals, including a euro-area budget and a joint finance minister.

Le Maire reminded German politicians that France has “also taken very difficult decisions.” In his view, now it’s Germany’s turn to act.

“If the answer from Germany is we won’t make any move, that’s a problem,” he said. “But that is not what I am hearing and we have started to make some progress.”

Le Maire said he’s confident a compromise can be found. “A fiscal capacity doesn’t mean transfer union.” And to make absolutely sure the message was received, he repeated his point in German.

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