MNI INSIGHT: Macron Euro Vision Comes Under German Vote Cloud

--Likely Governing Coalition May Leave Merkel With Little Room for Manoeuvre

By Jack Duffy

     PARIS (MNI) - French President Emmanuel Macron will unveil his vision for

reform of the Eurozone on Tuesday, even as Germany's election results signalled

that the road to greater European integration may be about to get rougher.

     In speech at the Paris-Sorbonne University, Macron is set to announce a

"road map" of around 10 major proposals to be phased in over the next 10 years

to deepen ties among euro area countries, MNI understands.

     They are expected to include the creation of a Eurozone finance ministry,

parliament and a euro area budget, as well as plans to transform the European

Stability Mechanism into a European Monetary Fund.  

     Scheduling the speech just two days after the German election was always a

big risk but Macron wanted to weigh in on the German coalition building process

at the same moment his first budget was demonstrating France's new fiscal

responsibility, officials said. 

     "France wants its position to be clear as a new government is formed in

Germany and we want all parties to know that France is a serious and credible

partner," one French government official told MNI.

     Macron's budget for 2018 to be unveiled on Wednesday will confirm that that

the government will meet the 3% Maastricht Treaty deficit rule this year for the

first time since 2007. The budget shortfall is expected to be 2.9% of GDP this

year and 2.6% in 2018, putting France on track to exit the EU excessive deficit

procedure. 

     Finance Minister Bruno Le Maire is also expected to confirm Wednesday that

France's chronically bloated public spending will fall to 53.9% of GDP next

year, the biggest drop in 15 years and the lowest level since the start of the

financial crisis.

     Despite such positive fiscal news, Germany's election results have now put

Macron's euro vision in doubt and all but eliminated chances of a swift "grand

bargain" between Paris and Berlin.

     A so-called Jamaica coalition between CDU/CSU, the liberal Free Democrats

and the Greens would leave Chancellor Angela Merkel little room to manoeuvre on

issues like a euro area budget. FDP leader Christian Lindner said Sunday that

taking funds from national budgets for a euro budget was a "red line" for the

party. 

     Is is unclear if the German vote results will cause Macron to scale back

his ambitions. Elysee Palace officials would say only that Macron will lay out

his ideas on Tuesday and that he hopes those ideas will be taken into account as

Germany forms its news government.

     Macron appears well aware of the difficulties his plans face now that

Merkel must bargain to build a government. According to the French daily Le

Monde, he recently told a visitor to his office at the the Elysee that: "If she

allies with the liberals, I'm dead."

--MNI Paris Bureau; tel: +33 1-42-71-55-41; email: jack.duffy@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$E$$$,M$F$$$,M$G$$$,M$X$$$,MC$$$$,MT$$$$,MX$$$$,MFF$$$,MFG$$$,MFX$$$]