Merkel Signals Openness to Eurozone Reform

German Chancellor Angela Merkel for the first time sketched out the outlines of a bargain with France on fixing the governance of Europe’s single currency, in the clearest sign yet that the two biggest eurozone countries are inching toward reconciling sharply different views on the matter.

Germany could support two central French demands—the appointment of a eurozone finance minister and the creation of a common budget—if some conditions were met, Merkel told business leaders in Berlin on Tuesday, Dow Jones reported.

“We can of course think about a eurozone budget as long as it’s clear that this is really strengthening structures and achieving sensible results,” she said.

In a striking softening of previous language opposing broader financial burden-sharing among member states, Merkel said “we could think about a common finance minister…if we aren’t pooling liabilities in the wrong place.”

As qualified as it is, Merkel’s surprise overture on an approach long taboo in Germany suggests the stalled process of reforming the eurozone could kick back into life sooner than most experts had expected. It comes a month after pro-European Emmanuel Macron was elected French president, a win many see as evidence that the continent’s political mood is growing more supportive of the European Union—and a moment, advocates of further eurozone reforms say, that should be seized.

An adviser to Macron said Merkel’s apparent openness to reforms was “very positive”, calling it “part of this new Franco-German climate of confidence”.

The chancellor’s comments took even some German officials by surprise, coming ahead of a national general election in September. Berlin had refused to engage in detailed talks about the eurozone’s future before the vote, insisting Macron had to prove his mettle first by enacting domestic economic measures over the summer.

Speaking before Merkel in Berlin, the head of the German Federation of Industry, Dieter Kempf, endorsed the idea of a common eurozone budget and finance minister “if these steps are correctly conceived”. With such an approach, he said, “weak periods and imbalances could be countered early and the possibility of real crises further reduced”.

The crisis that engulfed the eurozone in 2010 and is only beginning to dissipate laid bare deep defects in the currency union’s design, including weak central control on public spending and the absence of incentives for countries to harmonize disparate economies. The eurozone also lacks the ability to raise and spend money in ways that could help buffer downturns.

The severity of the cash crunch forced several member states to seek emergency assistance from their peers and from the International Monetary Fund. It also nearly caused the bloc’s weakest member, Greece, which remains under financial tutelage to this day, to drop out of the bloc.