Emmanuel Macron and Olaf Scholz lead the EU’s two biggest economies, sharing a 280-mile border. But when it comes to protecting Europe from global threats, these neighbors may as well be on different planets.
At an event in Berlin this week, the French president warned that the EU “could die” and that if it continues with a “classical” free-trade agenda, it will be “out of the market” in two or three years. He made the case that Europe should embrace a more protectionist agenda if it wants to survive.
Scholz meanwhile argued that a push to protect European industries from unfair trade practices “must not lead to us harming ourselves.” Germany is set to vote against new EU duties on Chinese electric vehicles on Friday, after Scholz intervened to toughen up his country’s opposition to the move.
The clash dramatizes the dilemma facing the bloc’s 27 governments at a highly sensitive moment for global trade. The U.S. presidential election is on a knife edge and could see Donald Trump reelected in one month’s time. He has past form playing hardball with the EU on trade and has proposed sweeping new tariffs if he wins back the White House for the Republicans.
But even Democrat Joe Biden’s presidency has taken American policy in a protectionist direction, prioritizing domestic firms for hundreds of billions of dollars worth of industrial investment and tempting European companies to relocate to the U.S.
With China increasingly assertive especially in critical new carbon-neutral technology and supply chains, the EU has some choices to make if it wants to compete. Those decisions will require a large degree of consensus from national leaders. And the bloc’s two biggest powers can’t seem to agree.
At the Berlin Global Dialogue on Wednesday, Scholz and Macron shook hands, smiled warmly and then spent the day offering wildly different takes on what Europe must do next. They diverged on key topics including proposals for joint EU borrowing, duties on imports of Chinese vehicles and trade talks with South American countries.
During a Q&A at the event, Macron hinted at his difficulties with Scholz when he was asked whether he would be able to convince Berlin to issue joint EU debt, as proposed in an official report by former Italian PM Mario Draghi. The French leader laughed and said the last time it happened had been in response to the pandemic, with some help from “a colleague called Covid-19.”
Macron and Scholz discussed the Draghi report on Europe’s competitiveness, which will be on the agenda of the next European Council summit. Officially, both Paris and Berlin say they agree with Draghi. But, in reality, they disagree on the proposed new wave of joint EU borrowing to invest in strategic sectors and rival China and the U.S. While France has often called for new EU debt and for repeating the experience of the post-pandemic recovery plan, for Germany that’s a no-go.
This is not the first time the two leaders have been at loggerheads on European policy with tensions frequently bubbling over and once culminating in the cancellation of a joint Cabinet meeting in 2022. It doesn’t help that Scholz and Macron have very different leadership styles and personally don’t get on particularly well.
It’s my economy, stupid
Over the past months, France and Germany made great efforts in public to display their shared vision for the EU’s economic agenda, signing joint blueprints on Europe’s industrial policy and co-drafting amendments to the European Council summit conclusions.
But when it comes to the biggest existential issues facing Europe, Berlin and Paris systematically disagree.
France has been the cheerleader of an EU probe into subsidized Chinese electric vehicles which resulted in provisional tariffs hitting Chinese EVs. Since the investigation launched last year, Germany raised concerns that it could backfire. Berlin is expected to vote no in a key EU vote to confirm import duties proposed by the European Commission on Friday.
But the truth is that despite all the leaders’ rhetoric about having Europe’s best interests at heart, both Scholz and Macron have their eyes firmly on domestic concerns.
“We just don’t have the same interests,” said French Senator Ronan Le Gleut, president of the Franco-German Senate friendship group. “We don’t have the same priorities, France’s automobile industry doesn’t export in China, or very little … whereas things like the crisis at Volkswagen worry everyone in Germany.”
On Wednesday, Macron called for more cross-border mergers between EU companies in a not-so-implicit criticism of the German government, which wants to torpedo the takeover of Germany’s Commerzbank by Italy’s banking giant UniCredit.
Weak leaders
According to Senator Le Gleut, France and Germany always go through a phase of disagreement before finally muddling their way toward a compromise. “At the end of the day we are not going to dislocate the EU over national differences,” he said. Le Gleut pointed to France and Germany finally reaching a deal on reforms to the energy market last year.
But even that spat isn’t over. After spending years fighting on whether to include nuclear power in one list of EU green investments, Paris and Berlin kept battling over the issue on almost every Brussels text that followed.
France wants to recognize nuclear as a strategic technology and ease state aid rules for the sector. But a top German official last week warned that EU resources should not be spent on nuclear power.
It’s also getting harder for both Berlin and Paris to make concessions that will upset voters at home, even if their countries benefit from a compromise.
The French president faces a fractured National Assembly and a surging far right. Meanwhile, Scholz, whose party has suffered a series of election defeats, is eyeing a federal election that is due by next September but could come earlier if his government falls apart.
Frustrations are also growing in both capitals over the other’s perceived inability to budge on the EU’s existential questions.
On free trade, Nils Schmid, a German lawmaker for Scholz’s Social Democrats said many countries would rather be “trading with the EU than with China.” But if the EU continues to drag its feet on the deal between the EU and the South American Mercosur trade bloc, “it’s China who will be redefining trade rules.”
“There is a geopolitical dimension — often the French accuse the Germans of not thinking about geopolitics, but there we feel that they are stuck in their Franco-French thinking,” said Schmid, who is also a member of the Franco-German parliamentary assembly. “Impatience is growing in Germany,” he said.
Hans von der Burchard and Koen Verhelst contributed reporting.
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