Eurozone: President Macron’s gentle move to force Germany to show its European cards - ING

Analysts at ING notes that only two days after the German elections, French President Macron presented his vision for Europe’s priorities in the coming years and keeping the next German government as a close ally had obviously higher priority than presenting far reaching reforms for the Eurozone.

Key Quotes

“On 26 September, French President Macron presented his vision for Europe’s priorities in coming years at Sorbonne University. The timing of the presentation was deliberately chosen. While Macron did not want to interfere in the German election campaign, he will now at least leave some marks on the coalition negotiations in Berlin. Macron’s proposals encompassed several themes but had as a general motto one of his Presidential campaign pledge for a more protective Europe with a more integrated core. It was also the attempt to give Europe a vision, heart and feeling. “Europe is also an idea,” Macron said, “some will tell you it’s not the right moment. But it’s never the right moment”. In his almost two-hour long speech, Macron presented a long laundry list of new, old or just recycled ideas and policy proposals.”

“Financial market participants and Eurozone experts had obviously put their eyes and minds on what Macron had to say on the Eurozone. Remember that initially the speech had been framed as a Eurozone integration speech. However, Macron’s proposals for further Eurozone integration did not bring much news on top of the well-knowns. Macron reiterated the proposal for a Eurozone budget, to be funded through a part of corporate tax receipts (which in turn should see more harmonisation in the coming years, according to Macron). However, Macron did not comment on the size or the timetable for such a budget. It seems as if in the end, Macron tried not to touch upon the touchiest issues in Germany. Probably in order to keep Germany as an ally and not a first opponent of his pro-European vision, but also in order not to affect the upcoming coalition negotiations in Berlin.”

“What to expect from Berlin?

Given Macron’s very brief proposals on the Eurozone, the German reaction to Macron’s speech should be positive. In fact, many ideas have already been circulating for a while, some were even proposed by the German government itself.”

“Good start of (a long) debate

Macron’s long-awaited speech was a first attempt to surf on the current wave of eu(ro)phoria and to rebuild a new positive European narrative and vision. As regards the Eurozone, however, Macron remained remarkably tight-lipped. In our view, a clear sign that at the start of this discussion, keeping Germany as an ally is Macron’s main goal. A smart move as putting Germany in “opposition mode” from the beginning onwards could be a hit beyond repair to the current eu(ro)phoria.”