Emmanuel Macron, the newly elected president of France, is facing two gigantic economic tasks – to revive the sluggish growth of the French economy and of the Eurozone. He wants to save the common currency by deepening the relations among the 19 Eurozone countries and has therefore proposed a common Eurozone budget, funded from both tax revenues and common borrowing, which would finance investment programs, and support countries hit by economic crises. Mr. Macron suggested in a diplomatic manner earlier this year that Germany’s huge trade surpluses and fixation on fiscal austerity have hampered growth elsewhere in the EU.
In order to succeed, Mr. Macron will have to get support of Germany, which is firmly against the idea that Eurozone countries should follow common rules but keep their taxpayers’ money separate. The French and German leaders now have a chance to revamp the Eurozone and the wider EU and the stakes are high. If they fail to revive the European project, which has been troubled by crises for a decade, populists will likely return boosted in the next election cycle.
While economic growth has returned to the EU, it is not spread evenly. Moreover, it carries the stigma of the economic crisis – high unemployment in France and in the South of the EU. The Eurozone is not a perfect monetary union because despite the common currency, it lacks common taxes, spending and borrowing and its banking union is only half-built. Therefore, Mr. Macron needs to persuade Berlin that he is able to shape change in Europe, which would also help him domestically. However, the prevalent opinion in Mrs. Merkel’s government is that more integration towards a federal Europe would currently only boost populism rather than counter it.