REPEAT: MNI: Germany May Seek Lesser EC Role In Any EMF Deal

Repeats Story Initially Transmitted at 05:50 GMT May 11/01:50 EST May 11

By Chris Mc Innes

     BERLIN (MNI) - The scale of the European Commission's role in a potential

European Monetary Fund will be as important as the EMF's actual set up and remit

in determining whether it receives support from the Bundestag, MNI understands

from conversations with senior parliamentary sources in Berlin.

     Parliamentary sources from the governing coalition have told MNI they have

been irked by what they consider to be the Commission's overreach in the past.

Another point of contention has been the "political" skippering of the Brussels

executive institution by current President Jean-Claude Juncker.

     One source from the governing coalition stressed that the Commission should

return to the purely administrative role assigned to it by the treaties, which

would exclude it from any meaningful say in the management of the potential new

institution.

     Another source said that the Commission's lax enforcement of the Eurozone's

fiscal rules -- a direct result of Juncker's politicization of the Commission --

had disqualified it from serious consideration for any involvement in a

potential EMF with fiscal oversight powers.

     --DIFFICULTIES AHEAD

     Chancellor Angela Merkel will have her work cut out ahead of the EU summit

in June, when she will present an EU and Eurozone reform package together with

her French counterpart Emmanuel Macron. She will have to account for domestic

pressures as well a sceptical Northern wing and the possibility of a  suddenly

Eurosceptic Italian government, if a Five Star-Lega coalition is confirmed.

     On Monday, Merkel reiterated Germany's conservative stance regarding the

proposals currently being considered, stressing once again that a common deposit

insurance scheme was a non-starter so long as weaknesses remained in large

swathes of the EU banking sector.

     Merkel also stressed that the European Stability Mechanism, which could be

turned into an EMF and therefore arguably at the centre of reform talk, should

remain an inter-governmental institution. This would indicate that the European

Commission would only have a diminished role, if any.

     The possibility that no grand bargain will be struck in June is therefore

very real. Conscious of the political cost of such an outcome, at least one

senior German parliamentarian suggested that talks could instead focus on a

European corporate tax regime and EU VAT reform, which could receive broader

support.

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

--MNI Frankfurt Bureau; +49 69 97782671; email: frankfurt@marketnews.com