The election of Emmanuel Macron as president of the French Republic and the acquisition of a parliamentary majority by his “En Marche” movement has raised the prospects for Franco-German cooperation and reinvigorated the process of institutional and political progress in the European Union, and, in particular, the euro area. If the expected electoral victory of chancellor Angela Merkel in September does in fact occur, for the first time in about fifteen years there will be a coordinated political cycle between the governments of these two major euro area economies. Indeed, this expectation is already reinforcing dialogue between Paris and Berlin. Such coordination could make it possible to implement the path outlined by the European Commission at the end of March (see Reflection Paper on the Deepening of the Economic and Monetary Union), based on the resumption and deepening of the many issues evoked by the Five Presidents’ Report (Completing Europe's Economic and Monetary Union, June 2015).

It is important that Italy offers its active contribution to this path in order to orient it to the fulfillment of both the general interests of the entire European Economic and Monetary Union (EMU) and the protection of the most fragile member states. President Macron has reiterated the importance of the Italian role, perhaps to reduce the risk that Germany's overwhelming weight could erode the French bargaining space. In addition, chancellor Merkel seems willing to involve Italy and Spain in the new European yard, giving a signal of confidence in the process of further integration of the euro area. However, the strong political and financial uncertainty characterizing Italy since the fall of 2016 is a serious hindrance for any initiative aimed at strengthening a shared responsibility within the EMU.

In this Policy Brief, we present a hypothesis of completing the institutional framework of the euro area meeting two conditions. First, in order to be accepted by Italy’s partners, a new framework must safeguard the responsibility and stability requirements of each member state; second, and
indispensable for Italy, it must secure growth support through the advancement of European economic cooperation. Such conditions can achieve a balance in the trade-off between stability and growth, reconciling the distinct visions of Germany and France, and, above all, the fundamental divergences between Germany and Italy.

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