MESEBERG, Germany—Angela Merkel bowed to French President Emmanuel Macron’s demands for a eurozone budget on Tuesday as part of a package of measures to overhaul the European Union, which the two will now put to their neighbors in a bid to overcome the continent’s deepening divisions.
While the size of the budget has yet to be determined, the German leader’s concession means Berlin and Paris—the eurozone's two largest economies—will face the bloc’s other member states with a joint line when they meet in Brussels to discuss...