French President Emmanuel Macron, right, and German Chancellor Angela Merkel prepare to address a media conference at the conclusion of an EU summit in Brussels on Friday, March 23, 2018. (Geert Vanden Wijngaert)
Emmanuel Macron and Angela Merkel are expected to lobby for the deal’s survival in Washington next week © AP

Angela Merkel’s conservative party has severely criticised EU plans to create a European monetary fund, a move that will cast a pall over French president Emmanuel Macron’s efforts this week to win German support for eurozone reform.

The parliamentary group of Ms Merkel’s CDU/CSU bloc has put forward a position paper demanding that the Bundestag have more say over plans to transform the European Stability Mechanism, the eurozone’s financial rescue fund, into a regional version of the IMF.

The paper is due to be discussed at a meeting of the parliamentary group on Tuesday, just two days before Mr Macron visits Berlin. Its authors expect its harsh tone to be endorsed by most CDU/CSU MPs.

The French president’s trip comes at a sensitive time for the cause of eurozone reform. France and Germany have been trying to reach a common position on overhauling the single currency area ahead of a crucial EU summit in June.

Mr Macron favours bold reforms such as the introduction of a eurozone budget and finance minister. But Berlin has resisted such ideas, with conservatives fearing they could lead to more cash transfers from German taxpayers to weaker eurozone countries.

Lucas Guttenberg, senior research fellow of the Jacques Delors Institute — Berlin, said conservatives in the CDU/CSU bloc had been encouraged to speak up because Ms Merkel and finance minister Olaf Scholz had stayed silent on the issue of euro reform.

“This could be the moment when eurozone reform dies,” he said. “If neither Merkel nor Scholz steps up now, then the eurozone summit in June will be a failure.”

Transforming the ESM into a European monetary fund that would better protect the euro area from crises is one of the few things that Germany and France appear to agree on.

But the CDU/CSU position paper said such a move could have a “significant financial effect on the [German] national budget” and insisted the process be controlled by the national parliaments of the eurozone member states, including the Bundestag.

It also rejected an idea put forward by the European Commission to create the monetary fund through a majority vote of the 19 eurozone states in the European Council. The CDU/CSU said the fund could only be set up through EU treaty change — a condition that critics said sharply reduced the chance of it being created.

The parties’ paper also rejected the idea of creating a common backstop for failing banks.

Politicians on the right and left reacted angrily to the position paper. EU Commissioner Günther Oettinger said it was “unacceptable” and “endanger[ed] the whole idea of a new dawn for Europe”.

“German politicians can’t keep filleting, dismantling and then rejecting all of [Macron’s] proposals,” he said.

Criticism also came from the Social Democrats, Ms Merkel’s coalition partners. They pointed to the coalition agreement signed between the two blocs in February, which promised a “new dawn for Europe” and committed the new government to expanding the ESM.

“If the CDU/CSU fails to act in compliance with our agreement on such a key issue, I ask myself what Merkel’s . . . word is worth,” said SPD whip Carsten Schneider.

Sven Giegold, a Green member of the European Parliament, said: “The CDU/CSU group wants to thwart reform of the eurozone and drive Europe’s future into the wall.”

Additional reporting by Mehreen Khan

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