German Chancellor Angela Merkel has offered to allow the eurozone's purse strings to be loosened in a concession to French President Emmanuel Macron's call for reform. With political turmoil in Italy and Spain and trade tensions with the US, Macron has called on Germany to kick its "fetish" for budget adn trade surpluses.
Merkel is ready to back an investment budget with finance "at the lower end of the double-digit billions of euros range", she told the Frankfurter Allgemeine Sonntagszeitung newspaper.
The "rainy day fund" would help reduce the economic imbalance between rich and poor European countries "which need to catch up in the areas of science, technology and innovation", she said.
"We need quicker economic convergence between the member states," she said. "To do that we have to strengthen investment capability with the help of additional structural policies."
Germany and France are to hold talks ahead of an EU summit at the end of the month to try to coordinate the positions on reform after Brexit.
The sum she mentioned appears to be lower than that envisaged by Macron but is nevertheless an easing of the German position, which has aroused resentment in countries like Greece and Italy.
The recent Italian election saw two eurosceptic parties, the far-right League and the anti-establishment Five Star Movement, form a coalition.
Both have have argued that Berlin's austerity policies have helped bring indebted countries in southern Europe to their knees.
Merkel, who herself was weakened by last year's German election, said she was "absolutely open to talking to the new Italian government about ways to help young people find work".
She also addressed plans to upgrade the European Stability Mechanism (ESM), which oversees bailout loans to troubled member states such as Greece, into a European Monetary Fund.
"We aim to make ourselves a little more independent of the International Monetary Fund," she said.
She proposed offering short-term credit lines to stricken countries but "always subject to special conditions, of course, for a limited amount and with complete repayment".
But she insisted she would draw the line at German taxpayers assuming responsibility or other nations' debt.
"Solidarity between partners should never lead to a union of debt," she said. "It must be about helping others to help themselves."