Burton Mills: Germany and France Call for Eurozone Reform

Burton Mills economists report that French finance minister Bruno Le Maire says Germany and France aim to reach a mutual agreement on euro zone reform, including capital markets, the banking union and tax convergence by no later than June this year.

In a statement after recent discussions in Paris with the German Finance Minister, Peter Altmaier, Le Maire said that a joint French-German position would prompt other Eurozone leaders to join the discussions.

At a recent press conference, Le Maire stated that the completion of a banking union, tax convergence and capital markets union were a top priority for Germany and France. He added that the aim was to reach a final joint decision on these three issues between March and June of this year.

Burton Mills economists say that Germany has already voiced its concerns over how risks would be divided between the euro zone countries as further progress is made on banking union.

While the euro zone has established a common banking supervisor at the European Central Bank, the financial bloc has battled to reach an agreement on a strategy to close problematic banking institutions and agree on a joint deposit insurance system.

Burton Mills economists believe that, for Germany and France to achieve this goal, risks will need to be reduced and a plan to avoid future crises in the banking sector must be formulated.

Le Maire demonstrated France’s willingness to overcome certain technical problems that have plagued the euro zone when he stated that France is prepared to address Germany’s concerns and, specifically, the way in which non-performing loans are dealt with. This is a particularly delicate issue for Italy due to a large number of bad loans on the balance sheets of some Italian financial institutions.

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