REFILE-UPDATE 1-German parties offer first response to Macron on Europe

(Fixes headline to make it “offer” not “offers”)

* Policy document pledges “new awakening” for Europe

* Document is first concrete response from Berlin to Macron

* Devil in the detail on ESM, investment budget plans

By Noah Barkin and Andreas Rinke

BERLIN, Jan 12 (Reuters) – German Chancellor Angela Merkel’s conservatives and the centre-left Social Democrats (SPD) pledged on Friday to work closely with France to strengthen the euro zone, saying they were open to creating an “investment budget” for the currency bloc.

In a 28-page policy document agreed after all night talks between the parties, they also backed the idea of turning Europe’s ESM bailout mechanism into a full-blown European Monetary Fund that would be placed under parliamentary control and anchored in EU law.

The document is expected to form the basis for formal coalition talks between the parties that could begin later this month if grassroots party members give a green light.

Merkel’s first attempt to form what Germans refer to as a “Jamaica” coalition with the Greens and Free Democrats (FDP) collapsed in November.

The section on Europe, entitled “A New Awakening for Europe”, is the most concrete response so far from Berlin to French President Emmanuel Macron’s ideas for reforming the EU, spelled out days after the German election in September in a speech at the Sorbonne University in Paris.

Macron has called for a euro zone budget to help the bloc cope with economic shocks. He also supports the creation of a finance minister and stand-alone parliament for the euro zone — ideas that are viewed with scepticism in Germany and did not appear in the coalition document.

“In close partnership with France, we want to sustainably strengthen and reform the euro zone so the euro can better withstand global crises,” the parties said.

They committed to devote “specific budget funds” to the economic stabilisation of the single currency bloc and to support “social convergence” and structural reforms, saying this could form the basis of a future “investment budget” for the euro zone.

“This is far better than what Jamaica wanted to do. Good opening for DE-FR cooperation,” tweeted Henrik Enderlein, director of the Jacques Delors Institut Berlin, a think-tank. “But the devil is in the detail on these issues. So the key negotiations are still ahead.”

The document acknowledges that Europe must increasingly take its fate into its own hands because of policy shifts in the United States and the challenges of a stronger China and more aggressive Russia.

And it acknowledges the crucial role that Franco-German cooperation will play in that process, saying a renewal of the EU can only succeed if Germany and France “work together with all their strength” to that end.

Merkel has come under mounting criticism in recent months for failing to respond to Macron’s proposals. She vowed at a summit of EU leaders last month to develop joint positions on Europe with the French president by March.

But that will likely depend on whether she can build on the policy document agreed on Friday and forge what would be her third “grand coalition” – comprising her Christian Democratic Union (CDU), its Bavarian Christian Social Union (CSU) sister party, and the SPD – over the coming months. (Reporting by Andreas Rinke and Noah Barkin; Editing by Michelle Martin)

Source: Reuters

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