Merkel Bids Draghi Farewell, Warning Him Not to Push Germany Too Far

(Bloomberg) -- Chancellor Angela Merkel told Mario Draghi there are limits on how far Germany will be willing to pool its finances with the rest of Europe on her farewell visit to Rome. 

There were warm words between two veterans of the financial storms that buffeted the euro area a decade ago. But Merkel also drew a line in the sand on the prospect of a true fiscal union for the currency area. 

“A transfer union wouldn’t be good for Europe,” Merkel said at a joint press conference standing alongside the Italian prime minister. “From my view, there must always be a conditionality.”

The German leader is due to step down shortly after 16 years in power. Once she’s gone, Draghi will be one of only a handful of people left in the European Union leaders’ council with direct experience of the dark days of 2011 when the currency union nearly broke apart.

An emotional Draghi, wearing his classic blue tie, welcomed Merkel at Palazzo Chigi in Rome, where the German flag was waiving in the wind. Merkel appeared at ease. Crowds of tourists cheered the outgoing chancellor, and she waved at them from the window.

Both celebrated their common efforts to save the euro and pledged to protect it in future. Merkel said she expects Germany will have a new government in place soon. Draghi said that her presence will be missed on the public stage, but that he expects to see her often in Italy all the same. 

Despite their personal rapport, Merkel and Draghi have found themselves on different sides of the debate over the future of the EU, and Merkel has already started to defend her legacy.

Draghi, a former president of the European Central Bank, has for years urged euro-area governments to complete a fiscal union in order to consolidate the single currency. 

As the head of the bloc’s biggest economy, Merkel has been more cautious to ensure that German taxpayers aren’t left on the hook for the spending of other countries. 

Last year’s agreement to finance the EU recovery fund with jointly issued debt was a watershed moment for Germany in that respect. 

“When the recovery fund becomes a success for Italy, for society and the economy, we will grow faster, will be more credible,” Draghi said. “Then we can think about an effort that is not a one off. Solidarity is always linked to responsibility.”

After the press conference, Draghi and Merkel headed to the terrace of Hotel Eden for a private lunch overlooking Rome. 

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