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Merkel told the Frankfurter Allgemeine Sonntagszeitung ahead of a crunch EU summit this month that Germany as the eurozone’s top economy would support an investment budget whose total would be “at the lower end of the double-digit billions of euros range”.
She said the “rainy day fund”, as it has been dubbed, would serve to help even out economic imbalances between richer and poorer European countries “which need to catch up in the areas of science, technology and innovation”.
“We need quicker economic convergence between the member states,” she said. “To do that we have to strengthen investment capability with the help of additional structural policies,” the Chancellor said, adding that the fund would be phased in gradually and then evaluated in terms of its effectiveness.
Although Merkel’s budget target falls short of the range proposed by Macron, it represents a concession of sorts to his view that excessive austerity has undermined faith in the bloc.
“It’s the only possible way to strengthen to eurozone and the European Union. We remain fully committed to it and have the same level of ambition.”
European Monetary Fund (EMF)
Merkel also supported the suggestion – originally a German idea – of turning the euro zone’s ESM rescue fund into a European Monetary Fund (EMF) with powers to give members hit by sovereign debt troubles short-term credit lines.
The European Stability Mechanism (ESM) is an intergovernmental body which oversees bailout loans to troubled member states, such as Greece. It was set up in the midst of the eurozone crisis in September 2012 and has a lending capability of €500 million.
“We aim to make ourselves a little more independent of the International Monetary Fund,” she said, underlining that the EMF would complement other measures to strengthen the euro, including a banking and capital markets union.
“If the whole euro zone is in danger, the EMF must be able to grant long-term credit in order to help countries,” Merkel told the paper. “Such loans would be spread over 30 years and be conditioned on sweeping structural reforms.”
She added: “In addition I can imagine the possibility of a credit line that is short-term, five years for example. As such, we would be able to take under our wing countries that get into difficulties because of extraordinary circumstances.”
And she also said the future EMF should be organised on an intergovernmental basis, ensuring national parliaments of member countries have oversight on how the money is used.
While cohesion among members of the single currency bloc was important, “solidarity among euro partners should never lead to a debt union, rather it must be about helping others to help themselves,” Merkel said when asked about reports that Italy’s new government had planned to ask the European Central Bank to forgive €250 billion of Italian debt. [...]