* Social Democrats, Greens hail Macron’s push for stronger EU
* Merkel’s Bavarian CSU allies against euro zone budget
* Pro-business FDP warns of “wrong incentives” with new funds (Adds more reaction)
By Michael Nienaber
BERLIN, Sept 26 (Reuters) - French President Emmanuel Macron’s proposals to strengthen the European Union drew mixed reaction in Germany, with a lawmaker from Chancellor Angela Merkel’s Bavarian allies warning against turning the bloc into an “unlimited transfer union”.
Macron offered a sweeping vision for a renewal of Europe in a speech on Tuesday, calling for the EU to cooperate more closely on defence, immigration, tax and social policy, and for the single currency bloc to have its own budget.
He was speaking two days after the German election in which Merkel’s conservative CDU/CSU bloc scored its worst result since 1949, limiting her freedom to manoeuvre on Europe.
The co-governing Social Democrats (SPD), which suffered its worst election result since the end of World War Two, ruled out a re-run of a “grand coalition” with Merkel.
Outgoing Foreign Minister Sigmar Gabriel, a senior SPD member, lauded the French proposals.
“Emmanuel Macron today held a courageous, a passionate plea against nationalism and for Europe - a Europe which he wants to reform, strengthen and unite with our help,” Gabriel said.
“Right now, we need to seize this opportunity for Franco-German initiatives to make Europe more democratic, involve the citizens and make it fit for the future.”
Gabriel said a joint determination by EU member states was needed to resolve problems in Europe, adding of Macron: “He can count on us.”
Cem Ozdemir, co-leader of the left-leaning Greens, a potential coalition partner for Merkel, told reporters in Berlin: “Germany should take Macron’s extended hand and push Europe forward, with other partners.
“It’s an important signal to us in Berlin that Macron makes his proposals directly after the German election. Because only if Paris and Berlin work closely together and have the courage to implement concrete reforms, can we strengthen Europe.”
Ozdemir, seen as a possible foreign or finance minister in Merkel’s coalition government, said the euro zone in particular needed reforms to make it resilient against future shocks.
“We need investment in digitization, sustainable technologies and infrastructure, in particular, to ensure long-term investment and create future-proof jobs,” Ozdemir said.
But Hans Michelbach, a lawmaker from Merkel’s CSU allies, said Macron’s ideas were unsuitable to take Europe forward. “They do not lead to a deepening (of the EU) but to a deeper split in the EU,” he said.
Michelbach accused Macron of planning to turn the euro zone into an “unlimited transfer union” and to roll back the EU’s Stability Pact.
“But these are the wrong lessons from the euro zone crisis,” Michelbach said, adding Macron should not be relieved of his duty to bring the French budget deficit in line with the EU’s fiscal rules.
His comments were echoed by Alexander Graf Lambsdorff, a senior member of the pro-business Free Democrats (FDP), another potential coalition partner for Merkel.
“This was a courageous speech by President Macron, even if not all of his proposals meet approval of the FDP,” Lambsdorff said.
Lambsdorff welcomed Macron’s call to strengthen military cooperation in the EU and seize the opportunities of digitization, but he rejected the call for a euro zone budget.
“The problem in Europe is not a lack of public funds, but the lack of reform. A euro zone budget would set exactly the wrong incentives,” Lambsdorff said.
The fiscally conservative FDP dislikes the idea of any facility that may lead to financial transfers from wealthier euro zone countries to poorer ones.
Macron said he hoped his ideas would be taken into account in Germany’s coalition building negotiations. Those talks are not expected to begin until mid-October and may take several months. (Additional reporting by Thorsten Severin and Sabine Siebold; Editing by Janet Lawrence)