Macron’s Ascent Stokes a Fight Over Euro in Germany

  • Merkel, SPD rivals clash over French election and the euro
  • Social Democrats see signal for ending austerity policy

Populism Stalls With Macron Win, Le Pen Defeat

Emmanuel Macron’s ascent to the French presidency is stoking an election-year fight over the euro in Germany, as the Social Democrats tell Chancellor Angela Merkel his resounding victory is the signal for her to dump fiscal austerity in Europe.

Trailing in the polls, the SPD is trying to turn Macron’s victory into a campaign weapon to energize its pro-European base behind Martin Schulz, the former European Parliament president who’s challenging Merkel in the Sept. 24 election. It’s the revival of a push by the Social Democrats, Merkel’s junior coalition partner, and allies who say the balanced-budget policies championed by Finance Minister Wolfgang Schaeuble are bad for Europe.

“Macron doesn’t want Germany’s money, he wants its solidarity,” Marcel Fratzscher, head of the DIW economic institute in Berlin, said by email. “Germany finally needs to accept more responsibility for Europe. The government’s rejectionist stance will lead to another crisis if the necessary European reforms aren’t finally addressed.”

German Foreign Minister Sigmar Gabriel, who once tapped Fratzscher to study ways to boost investment, set the tone in a statement eight minutes after polls closed in France on Sunday, saying “the time of financial orthodoxy and finger-wagging must finally end.” Merkel, responding at a news conference the next day, said Germany is ready to help “wherever possible” but France needs to take the lead in overhauling its economy.

Waiting Game

“We have to wait for the new president to present his ideas and his wishes,” Merkel told reporters in Berlin on Monday. “Then we’ll see which points we have in common. I don’t see that changing our policies would be the priority.”

“How expensive will Macron be for us?” Bild, Germany’s highest-circulation newspaper, wondered in a headline on Tuesday.

While the defeat of French nationalist Marine Le Pen was welcomed by Merkel and heartened European Union supporters across the continent, Germany’s red lines haven’t changed. Merkel remains opposed to shared euro-area debt, her chief spokesman Steffen Seibert said Monday. Any push by France for more economic stimulus or a special finance minister for the 19-nation currency union would also run into resistance in Berlin.

“The SPD can always think of only one solution to all problems: to spend more money and increase debt,” German Deputy Finance Minister Jens Spahn, a senior member of Merkel’s Christian Democrats, said in a text message. “It’s about structural reforms for more investment and growth in France, in Germany, in all of Europe.”

German Campaign

Combining a pro-European stance and calls for higher spending may help the SPD regain the momentum sparked by Schulz’s nomination as candidate in January. The day Macron celebrated his victory, the CDU defeated an SPD incumbent in a state election. Polls suggest Merkel’s party has a similar upset within reach next Sunday in North Rhine-Westphalia, home to about a fifth of Germany’s population.

Michael Stuebgen, chairman of the European Union working group in Merkel’s parliamentary caucus, said in an interview that shared fiscal instruments in the euro area are “not popular” among her lawmakers.

While that makes so-called euro bonds unpalatable, Stuebgen said other ways to reform the French and EU economies “are definitely worth considering.”

At a town-hall event in Berlin, Schaeuble said Germany will support any push by Macron to make the euro area stronger. Still, efforts to revive economies must always start at home and some of his proposals for Europe require EU treaty changes, which aren’t realistic, Schaeuble said Tuesday.

“The election result is good for Germany -- we need a strong French partner,” Achim Wambach, head of the Center for European Economic Research in Mannheim, said in an interview with Bloomberg Television’s Tom Keene. Even so, Germany’s trade surplus “will be an issue” that Macron will raise with the government in Berlin after the election in September, Wambach said.

— With assistance by Patrick Donahue

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