Germany and France agreed to drive ahead measures on closer European integration in a renewed show of unity by the region’s two biggest economies to fix the crisis in the Eurozone.
German Finance Minister Wolfgang Schaeuble, speaking after talks in Berlin with his French counterpart, Pierre Moscovici, said the two countries will create a working group to advance European Union cooperation on banking union, fiscal union and the strengthening of monetary union. They will seek to make common proposals, he said.
“We’re having to deal with a phase of weakening growth in the global economy but also in Europe,” Schaeuble told reporters. “We want to take joint decisions” to counter that.
The common action signals a turnaround in relations after President Francois Hollande led a revolt against Chancellor Angela Merkel’s austerity-first doctrine for combating the financial crisis at a June summit. It builds on a Berlin visit by Hollande last week when he and Merkel agreed to stand behind the Greek government as it strives to overhaul its economy nearly three years after the crisis emerged in Greece.
“It’s not in German interests to kick Greece out of the Eurozone,” Carsten Brzeski, an economist at ING Group in Brussels, said in an interview today with Bloomberg Radio’s Ken Prewitt. “Everyone realizes that it’s in the German interest to solve the crisis. At the same time, it’s become weak enough to show them that they’re not an economic island any more.”
Signs of rapprochement come as policy makers’ crisis-fighting efforts enter what Merkel said in an interview with Germany’s ARD television yesterday was a “decisive phase.”
The so-called troika of Greece’s international creditors is compiling a progress report that may determine the country’s future in the euro as the European Central Bank fleshes out bond-buying proposals announced by ECB chief Mario Draghi earlier this month. A top German court is meanwhile due to rule on Sept. 12 whether Europe’s permanent bailout fund, the European Stability Mechanism, is constitutional.
Draghi may provide further hints on policy when he speaks at the U.S. Federal Reserve’s annual symposium in Jackson Hole, Wyoming, on Sept. 1. Bundesbank President Jens Weidmann renewed his criticism of Draghi’s plan to help borrowing costs, telling this week’s Der Spiegel magazine that monetary financing of budgets can “become addictive like a drug.”