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Michel Barnier hands over the reins to the new prime minister, François Bayrou.
Photograph: Anadolu/Getty Images |
Why the Franco-German engine that powered the EU is currently kaput
Beset by political crises and economic turmoil, the bloc’s two biggest countries are both at a crossroads
“When France and Germany advance, all Europe advances. When they don’t, it grinds to a halt” was how former French president Jacques Chirac put it almost a quarter of a century ago at one of the periodic love-ins between the EU’s two biggest member states.
So what would Chirac, who died in 2019, make of the current condition of the famed Franco-German engine which, since the bloc’s inception, has powered so much of the postwar European project? It looks not so much faltering as comprehensively bust.
Emmanuel Macron on Friday appointed a new prime minister, his loyal centrist ally François Bayrou, who becomes France’s fourth premier this year and will have the daunting task of trying to assemble a stable government after the collapse last week of the country’s shortest-lived administration since 1958.
《Jon Henley in Paris and Deborah Cole in Berlin Sun 15 Dec 2024 The Obsever UK》
Meanwhile France’s public-sector deficit is on track to exceed 6.1% of GDP this year, more than double the eurozone limit; public debt is 110% of GDP and rising; and the bond markets this month rated France as marginally less creditworthy than Greece.
In Germany, the fractious centre left-led coalition in power for the past three years collapsed last month under the weight of its own ideological contradictions and the pressure of multiple crises triggered by Russia’s full-scale invasion of Ukraine.
Whoever becomes chancellor after the 23 February elections will have to tackle the world’s worst-performing big economy, beset by high energy and labour costs as well as bureaucracy, crumbling infrastructure and plodding digital expansion.
The slowdown with key trade partner China has also dealt a blow to German exports, a traditional strength, while the all-important car industry has been slow to develop attractive electric vehicles (EVs) and now faces the threat of swingeing US tariffs under Donald Trump.
With France unable to hold fresh parliamentary elections until July and Germany possibly without a new government until June, the political febrility at the top of the EU’s two most influential countries will inevitably hobble EU decision-making.
Paris and Berlin are seen as the EU’s core power axis, driving policy and defining the main contours of its agenda. With both capitals unable to make big policy decisions for want of strong governments, the bloc could face months or more in the mire.
The two powerhouses’ parallel economic and fiscal woes will also weigh heavily on the EU. Some analysts believe the bloc’s two largest economies – accounting for 41% of the 27-member EU’s entire GDP – would both contract economically in 2025.
The timing could not be worse, with Europe facing the return of America-first policies under Trump’s second presidency, with German industry (in particular) in crisis.
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The embattled Emmanuel Macron with chancellor
Olaf Scholz. Photograph: Nadja Wohlleben/Reuters |
Quite how it came to this is not too hard to understand. Figuring out how France and Germany might be able to pull themselves out of their ongoing political and economic doom spirals, however, is not so easy.
When the German government imploded last month, observers were less surprised by its demise than astonished that it had limped on for so long.
When chancellor Olaf Scholz fired his obstreperous finance minister, Christian Lindner, on 6 November over a bitter months-long budget dispute, he set in motion a chain of events that optimists say give the country a vital shot at renewal.
“Do we dare to powerfully invest in our future as a strong country? Will we secure jobs and modernise our industry? Are we ensuring stable pensions, reliable healthcare and good nursing care?” a defiant Scholz said on Wednesday.
Lindner’s sacking left Germany with a rump minority alliance of Scholz’s Social Democrats (SPD) and the ecologist Greens capable of only the most perfunctory policy-making from now until a new government is in place.
On Monday, Scholz, historically unpopular but nonetheless standing as his party’s candidate for re-election, will face a confidence vote he has called to trigger the new election.
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Marine Le Pen’s far right party joined forces with the left to oust French PM Michel Barnier.
Photograph: Alain Jocard/AFP/Getty Images |
If Scholz loses the MPs’ ballot, President Frank-Walter Steinmeier will dissolve parliament and Germany will officially embark on an intensely truncated campaign broken up by the Christmas holidays.
A recent poll put the centre-right CDU/CSU on 31%, followed by the far-right Alternative for Germany (AfD) on 18%, Scholz’s SPD on 17% and the Greens on 13%. The FDP and new leftwing conservative Sahra Wagenknecht Alliance are both scoring right around the 5% threshold for parliamentary representation.
The smart money as Germany’s next leader is therefore on Friedrich Merz, a longtime rival of his more moderate fellow Christian Democrat Angela Merkel, whose 16-year tenure as chancellor largely left Merz in the political wilderness.
He used the time to build a small fortune in business, notably at the German unit of multinational investment firm BlackRock. Merz, whose notoriously hot temper has reputedly mellowed slightly with age, has vowed to pull Germany out of a deep economic slump while taking a harder line on defence, Russia and migration.
But because Merz’s centre-right CDU/CSU alliance, assuming it comes in first, has little chance of winning an absolute majority, its choice of coalition partner will inevitably water down his economic reform plans. All major parties have ruled out cooperating with the far right.
“Germany’s current economic model, in which the supply of cheap fossil fuels and the production of cars with combustion engines play a central role, seems outdated – but politicians rarely dare to say this openly,” said Kai Arzheimer, a political scientist at the University of Mainz. “I’m at least sceptical that there will be a genuine fresh start in the near future.”
Friedrich Merz, in a suit and tie and wearing glasses, frowns as he holds his hands up to clap
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| Friedrich Merz at the Bundestag in Berlin, on 5 December. Photograph: dts News Agency Germany/Rex/Shutterstock |
If the new government fails to turn things around quickly, it is the anti-migration AfD, backed particularly by eastern voters, that stands to benefit the most.
Ursula Münch, director of the Academy for Political Education thinktank in Bavaria, said that with the SPD likely to become Merz’s partner, creating a middle-of-the-road government, disappointed hopes and disillusionment could prove to be a toxic mix.
“The expectations of the electorate, corporations and the media are very high – too high,” she said, given the years-long dodging of pressing structural problems as Germany has fallen behind. “That will overtax any government.”
But Münch said the emerging consensus that Germany needs to tackle its weaknesses head on could offer a compelling mandate to a straight-talking chancellor with a sufficient majority. “That would make me pretty confident that the Germans could become more optimistic again and develop more trust in democracy,” she said.
France’s current political problems – the country is undergoing its worst period of political volatility since the second world war – stem largely from Macron’s decision to dissolve parliament after his centrist forces were heavily defeated by Marine Le Pen’s far-right National Rally (RN) in this spring’s European elections.
In the parliamentary election, the New Popular Front (NFP), a coalition of left-leaning parties ranging from the mainstream Socialist party (PS) to the radical-left France Unbowed (LFI), headed by the political firebrand Jean-Luc Mélenchon, won the largest number of seats.
Macron’s alliance was beaten into second place and the RN (although it finished as the largest single party) placed third. Parliament was divided into three roughly equal and opposing blocs – broad left, centre and right/far right – none of which, crucially, enjoyed anything approaching a parliamentary majority.
After weeks of dithering and refusing to appoint a prime minister from the left, Macron tapped Michel Barnier, a veteran conservative and the EU’s chief Brexit negotiator, backed by a fragile minority alliance of centrist and centre-right MPs.
This month, the far-right RN joined forces with the left-leaning NFP to topple Barnier’s government in a no-confidence vote over the 2025 budget, which included about €20bn (£16.5bn) in tax increases and €40bn in public spending cuts.
Bayrou, his replacement, must try to cobble together a more solid ruling majority, possibly involving some of the centre left – or at least to secure a “non-aggression pact” that would not leave the new government prone to exactly the same threat, a no-confidence vote backed by both left and far right, as Barnier’s.
The parliamentary arithmetic, however, remains the same. Macron “seems to be getting ready to build a more stable governing pact with Conservatives, Socialists, Communists, and Greens”, who “seem ready to make compromises and avoid another government at the mercy of the RN”, said Rym Momtaz of the Carnegie Europe thinktank.
“But that’s only a temporary fix. He still doesn’t have a solution to reverse the surge in popularity Le Pen has enjoyed since 2017, and her significant chances of being elected president in 2027.”
It hardly bodes well for France’s fiscal problems, meanwhile, that the trigger for the outgoing government’s collapse was a belt-tightening budget whose central objective was the partial restoration of France’s ailing state finances.
At least, though, France seems to have “learned the lesson” that it needs “a credible, slow, fiscal tightening”, said economist John Springford of the Centre for European Reform. Germany, which needs tax and labour market reforms and public investment to raise spending, has yet to make that step, he said.
From an EU perspective, however, some analysts are cautiously optimistic. “It’s a premature view that France and Germany are down and out,” said Mujtaba Rahman of the Eurasia Group consultancy. “By the second half of next year, we should see a re-energised Franco-German engine.”
Germany’s elections being brought forward to February was “very positive”, Rahman said: “We’ll have clarity earlier in the year, a more coherent coalition and a more Russia-sceptical chancellor. And Merz and Macron will be much more aligned on the big issues than were Macron and Scholz.”
Macron’s domestic woes will not vanish overnight. “But there does seem to be a sense of the national responsibility to form a government, pass a budget and provide the minimum stability that France needs – and that Europe needs from France,” he said.
Most importantly, Trump 2.0 “has given weight and credence to everything Macron has been saying on security, defence and strategic autonomy”, Rahman said. The Paris-Berlin tandem “will be reinvigorated – and with a new, improved EU leadership, these people will give Europe its best shot at mitigating the worst of what might be to come”.⍐
