Merkel's conservatives warn eurozone budget could split EU

Berlin

MEMBERS of Chancellor Angela Merkel's conservative bloc opposed to larger financial contributions to the eurozone on Wednesday reacted with scepticism to her agreement with French President Emmanuel Macron to create a common budget for the currency bloc.

Mrs Merkel and Mr Macron hailed a "new chapter" for the eurozone after talks at the Meseberg retreat outside Berlin on Tuesday where they hailed the budget as a tool to strengthen economic competitiveness in the currency union. But details were scant.

Mrs Merkel's conservative bloc is divided over immigration and stiff resistance to eurozone reforms agreed with Mr Macron could further erode her authority and threaten to unravel her coalition government three months after taking office.

"The European Union will have a shadow budget for the eurozone," said Hans Michelbach, a lawmaker of the Christian Social Union (CSU), the Bavaria sister party of Mrs Merkel's Christian Democrats (CDU).

"For us, this is more like splitting Europe because countries that are not using the euro will be excluded. I am stunned by the promise that was given to Macron," he added, referring to Mrs Merkel's support for a eurozone budget.

Mrs Merkel said the budget would be used to strengthen economic convergence within the eurozone, which was almost torn apart by a debt crisis that took hold in 2009.

Mr Macron defended the agreement when pressed by journalists, saying the budget would be operational by 2021 with annual revenues and spending.

The two leaders had decided to focus on broad issues to leave more room for negotiations with the other 17 euro members, which leaves scope for the plans to be watered down.

National contributions and European resources would be used to fund the budget, the leaders said in the declaration.

"Now it's about the details. Much remains unclear and should be made public, including the size of the new euro budget and the level of German contributions," said CDU lawmaker Eckhardt Rehberg, parliamentary speaker on budget policy for the CDU/CSU.

"We will have to look carefully at the justifications given for new euro funds and credit lines in addition to existing ones," Mr Rehberg added.

He said the conservatives would not lend Mrs Merkel support for a European unemployment insurance system nor for a euro tax to fund additional spending plans. REUTERS