Macron’s Disastrous Eurozone Plan

https://www.nytimes.com/2017/05/24/opinion/macrons-disastrous-eurozone-plan.html

Version 0 of 1.

Correct me if I’m wrong, but I can’t remember a single European partner opening its wallet after 1989, when Germany faced its greatest economic challenge in postwar history. Somehow, without much support from its neighbors, this country managed to reunify a prosperous West with a post-Communist East whose factories and infrastructure had been worn down by 40 years of socialist mismanagement. Not only that, it incorporated 16 million East Germans into the Western social insurance and pension system they had never paid into.

No one in Europe rushed to write checks, but they lined up to give donations of historical skepticism and political demands. In order to soothe French anxieties in particular, the German government agreed to give up its beloved, powerful Deutschmark, a currency President François Mitterrand of France had likened to a German “nuclear force,” in favor of the euro.

So it’s all a bit rich to hear, during the recent French elections, politicians from the left and the right malign Germany for France’s enduring economic crisis, arguing that Germany’s outsize economic strength has come at the expense of its Gallic neighbor. It would be funny if it weren’t dangerous — the solution offered by the new, pro-Europe president, Emmanuel Macron, is to create a eurozone budget, with its own finance minister.

I firmly believe that the wounded, Brexit-crippled European Union needs an infusion of new self-confidence and resolve. But Mr. Macron’s proposal is a disaster in the making. It will only further alienate Europeans from one another and weaken the bloc economically.

For years, the European Union has suffered from a crisis of underperformance, pushed low by two forms of convenient self-deception: first, the blatant egoism when it comes to international challenges like refugee management and foreign policy; and second, an all too lighthearted approach when it comes to national matters like economic reform.

Brussels’s money has often been Europe’s curse. The Greek government, for instance, knew it could take for granted the support of the other euro members for its unsustainable budget after Chancellor Angela Merkel of Germany recklessly declared, “If the euro fails, Europe fails.” Athens slowed down on reform, knowing Brussels would bail it out, and northern Europeans grew angry.

In the worst case, Mr. Macron’s plan could turn this disincentive into a characteristic feature of the European Union. Without political leverage, Brussels would end up holding the purse but not the purse strings.

Mr. Macron hasn’t specified exactly how this centralized budget would work — and more to the point what his administration expects from Brussels, now or in the future. Along with talk about a Brussels budget, there’s also chatter in Paris about Eurobonds. Both measures would make certain euro members at least partially carry other members’ deficits.

That may explain a backhanded compliment by Germany’s foreign minister, Sigmar Gabriel, after the French election. “If a French president has the courage to set a clear signal for Europe after his election, then Germany must have the courage to rethink its own deadlocked positions within the monetary union,” Mr. Gabriel said.

Translated, Mr. Gabriel is saying that if Mr. Macron pursues real reforms — the “clear signal for Europe” — then Germany might be willing to open its own coffers — those “deadlocked positions” against bailouts as anything but a last resort. In other words, Mr. Gabriel is offering Mr. Macron a trade: real reform in France for real support from Germany — not just for France, but for the rest of the eurozone.

This isn’t nothing. Any attempt at reforming France by Mr. Macron will very likely be met with fierce resistance by the unions there. They, along with many supporters of the defeated nationalist contender Marine Le Pen, have long identified the new president and ex-banker as a coldhearted “neoliberal” who cares more about profits than about people.

This always seemed strange to me. Mr. Macron’s background aside, his reformist zeal is hardly unrealistic: He wants to cut the ratio of government spending to G.D.P. to 53 percent from 56 percent. If that makes him a malicious “neoliberal,” then what kind of monsters must be governing the euro states of neighboring Spain (42 percent) and Germany (44 percent)?

If French workers oppose any and all reforms, if they insist on keeping their 35-hour workweek and their retirement age at 62, that’s their choice. But they’d better stop complaining about Germany’s record trade surplus.

Yes, the euro has a built-in problem: Its member states cannot devalue their currency in times of crisis. But members knew that going in, and there’s no point repressing this now. Instead they can try working harder to catch up with the strongest.

In a nod to another youthful president, Mr. Macron needs to put more of this to his people: Ask not what Germany can do for you. Ask what you can do for France.