It would be a shame to miss this chance, said Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics.
“It is urgent, a window of opportunity between now and European elections is real but narrowing,” he said. “The constellation of the most centrist German chancellor in a long time in her last term looking for her legacy and a French president, newly elected on a European platform and highly ambitious is very rare.”
“If you think European reform can happen outside a crisis you’ll never get a better constellation than now,” he added.
If populism and nationalism surged with the impact of the financial crisis, Mr. Macron argues, the best answer is a more integrated European Union that protects and benefits its citizens and a more sustainable eurozone, with its own budget, banking protections and financial management.
But resistance to Mr. Macron’s vision of more Europe is mounting, in Germany and beyond. The prospect of Britain’s exit from the union a year from now has prompted the smaller, more economically conservative nations of Europe’s north to come out firmly against Mr. Macron’s proposals.
“It’s getting hard politically, it’s getting hard timewise, and it’s getting hard in terms of momentum,” said Jean Pisani-Ferry, a French economist and former adviser to Mr. Macron. “Not only for the countries with no appetite for it, but for Germany, too.”
In Germany, new ministers are still figuring out their jobs, Ms. Merkel’s governing Christian Democrats are running to the right and the Social Democrats, the center-left party in the coalition, have silenced their most prominent pro-European voices.
Christian Democratic lawmakers have been pushing to anchor any financial overhaul to a treaty change, which in turn would require approval from individual parliaments, creating considerably more uncertainty and delay.
“The Italian political mess will be an alibi for Germany and bad news for Macron,” said Enrico Letta, the Italian former prime minister, at a meeting of the Ambrosetti Forum in Italy. “We’re wasting momentum.”
Nouriel Roubini, a globe-trotting economist who predicted the crash of a decade ago, said that the fundamental problems of the euro “won’t be solved until you have real fiscal and then political union. But for now, it’s stalled, and the Germans will see the Italian risks as another reason not to move forward.”
The Germans are “worried as ever that risk sharing becomes risk shifting, that a fiscal union becomes a transfer union,” he said.
Until eurozone countries like France, Greece, Italy and Portugal “have done enough fiscal austerity so that public debt is sustainable, and do enough reform so that their potential growth approaches that of Germany,” Berlin will hesitate, he added.
At the same time, Mr. Roubini said, Mr. Macron has made some important fixes in France, increasing market flexibility, taxing some pensions and cutting the budget deficit.
“So he can tell the Germans that ‘it’s not only cheap talk I’m delivering, and while you may not be able to accept full range of reforms, we can meet somewhere in the middle,’ ” Mr. Roubini said.
Macron proposals like a eurozone finance minister and a budget, to help countries deal with high unemployment or economic shocks, have been put aside while the bloc tries to make a few less spectacular and more technocratic fixes.
Given timing, the European Commission has narrowed its focus, said Valdis Dombrovskis, the commissioner in charge of the euro and financial stability. “We need to strengthen the resilience of the eurozone economy and its shock-absorption tools,” he said in an interview.
That means, he said, concentrating on promoting structural reforms in member states, completing a banking union and turning the European Stability Mechanism, created during the Greek debt crisis, into a more competent European Monetary Fund.
The idea is to protect eurozone countries and their banks from another crisis. But there are concerns about the governance of the new fund, about how much money would be involved and about how non-eurozone members would contribute.
There are also worries about the amount of nonperforming loans still held by banks in countries like Cyprus, Greece, Italy and Portugal, as well as the amount of sovereign debt they hold, given the lesson of the euro crisis that sovereign bonds are hardly risk-free.
So Germany and northern countries in particular are pressing for more “risk reduction” before “risk sharing,” Mr. Dombrovskis said.
That means that another key change intended to reassure citizens — a European banking deposit insurance scheme, like one in the United States — is unlikely to happen soon.
Instead, Mr. Dombrovskis said he hoped for gradual progress, first to increase bank liquidity before moving toward mutualization of debts, which remains a red line for Berlin.
“But we need to move during this mandate,” he said. “We must agree not to lose another year.” Given the populist surge, “We need Europeans to feel these positive economic figures in their pocketbooks, to show people that they are better off with Europe than without.”
But risks increase over time, with growth due to slow in the medium term, Brexit unresolved, Italy confusing, and a possible trade war in the offing, noted Mujtaba Rahman, an analyst at the Eurasia Group. “Markets remain complacent for now, but it will not last forever,” he said.
Jyrki Katainen, the European commissioner for jobs and growth, said in an interview that “the main issue is trust among member states, which is not as good as it should be.”
Rather than a Macronian revolution, he urged evolution, and a road map for the next five or 10 years. “A longer perspective would help trust, with steps made conditional, so it’s not unbalanced,” he said.
Heidi Crebo-Rediker, who was the State Department’s first chief economist, said she foresaw a slow process. “Until you have confidence in all the banking systems, including Italy, and an agreement that risks can now be managed centrally, only then you take that final step forward,” she said.
“But just when you have the potential to move forward in France and Germany, there’s the potential for a real scare from the south, from Italy,” she added. “So even slow progress is now under threat.”
Mr. Katainen, a Finnish former prime minister, still sees progress coming from Paris and Berlin.
“Macron and Merkel get along well, respect one another, are both pro-European and ambitious,” he said. “Both want to leave a mark on Europe. I see Macron as pragmatic, setting his priorities for the future, but it doesn’t mean every detail must be done.”
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