BRUSSELS — Friedrich Merz’s arrival as German chancellor in May rekindled the fading Franco-German love affair — and the lovebirds have already found a shared interest: killing Europe’s ethical supply chain dream.
Merz and French President Emmanuel Macron joined forces this month to hobble new European Union rules aimed at boosting supply chain transparency, agreeing to mutual concessions that critics say have left the bill toothless.
The bilateral deal highlights a new era for the historical Franco-German relationship focused on a sharp pro-business agenda, some argue, thanks to a budding bromance between the two leaders.
Adopted last year, the EU’s supply chain oversight law requires companies to police their supply chains for possible environmental and human rights violations. But the bill has yet to be implemented, having been selected as part of a whole set of EU rules currently subject to a massive simplification effort to cut the regulatory burden for businesses.
EU countries on Monday agreed on a dramatically watered-down version of the revolutionary rules in record time. Initially presented by the European Commission in February 2022, the new version — if endorsed by the EU as a whole — will only apply to a fraction of the European companies initially targeted.
The new text “is possibly one of the first policy [deliveries] that is going to be restarting the Franco-German alliance,” said Alberto Alemanno, an EU law professor at HEC Paris.
Amid escalating trade tensions and geopolitical turmoil, the European Union is on a mission to reinvent itself as a prosperous, pro-business, anti-red tape powerhouse. Macron and Merz are leading the charge in that mission.
“It is a first success for the Franco-German couple,” said a French economy ministry official who was granted anonymity in line with the French government’s communication practices after the agreement among EU countries was announced.
That’s because Macron, a staunchly pro-business liberal, and Merz, an equally pro-business conservative, agreed on mutual concessions to make the text more palatable for the two countries, the same official explained.
The affinity the two leaders share has not gone unnoticed.
“There’s a bit of a honeymoon between Macron and Merz,” Alemanno said. “They really get along well because they have a very similar style of leadership. They are both very charismatic. They also say things that are quite unpopular, but they just say it.”
Last month, Macron told an audience of business executives that the due diligence directive ought “not just to be postponed for one year, but to be put off the table.”
His comments followed a similar statement from Merz, who had called for a “complete repeal” of the law during a visit to Brussels.
As their leaders were making bold public statements about scrapping the rules altogether, behind the scenes the French and German delegations in Brussels negotiated to effectively hollow out the file.
After the agreement was reached, Paris hailed the outcome as a joint win for Europe’s most powerful leaders, while Berlin stayed mum.
“The German government will not publicly comment on statements made by other governments or information based on anonymous sources,” a German government spokesperson said.
Civil society groups, meanwhile, question whether Europe’s supply chain oversight rules still make a difference.
“We’re getting to the point of, is it even worth having this law?” said Richard Gardiner, interim head of EU policy at the ShareAction NGO, arguing that if “badly written” rules are then enshrined in law, companies will have no incentive to do better.
A long time coming
The French and German positions come on the back of a tumultuous start to Ursula von der Leyen’s second term as European Commission president, during which she pledged to answer EU leaders’ calls to cut red tape for business.
One of the first concrete measures the new Commission took was an “omnibus” bill, an “unprecedented simplification effort” that watered down several green laws from the previous mandate, including the corporate sustainability reporting directive and the supply chain law.
The Commission wanted these changes to be fast-tracked.
“I have never seen them move this fast on a piece of legislation,” said ShareActions’s Gardiner, describing the policymaking process in Brussels as having gone from a “technocratic [process] to essentially a personality-based, knee-jerk reaction.”
Among the key changes to the rules is the number of companies that will be impacted.
While the Commission’s proposal was to exclude 80 percent of European companies from having to comply with both the sustainability reporting and the supply chain rules, EU countries ultimately backed a French proposal to limit the scope of the latter to companies with more than 5,000 employees and €1.5 billion in net turnover. In other words, fewer than 1,000 European companies would be subject to them.
And that’s what the French wanted.
“I think that this alignment between France and Germany allowed [us] to progress,” said the French official quoted above.
In particular, the French agreed to concessions on civil liability — a main concern of German companies, which did not want to be liable for breaches of the law at the EU level. In exchange, Berlin agreed to back the higher threshold that determines which companies are subject to the new rules to ensure they align with those that already exist in French law.
On the French side, there was a “prioritization of the topic of the threshold,” said a Parliament official familiar with the details.
The backstory
Berlin especially has long been at the forefront of the political war against the supply chain oversight law, with liberal and conservative politicians turning their opposition into a core component of electoral politics at a time of economic downturn, warnings of de-industrialization and global trade wars.
Even well before the Commission presented its rules, Germany was pressing Brussels to follow its lead and exempt companies with fewer than 1,000 employees. Back in 2022 the bill was already falling short of what progressive lawmakers and green groups were requesting.
After all three EU institutions managed to clinch a deal in December 2023 — overcoming an attempt by center-right European People’s Party (EPP) lawmakers to kill the file, and having already agreed to carve out the financial sector to win France over — the horse-trading intensified.
Germany’s liberals, back then the smallest party in the three-party coalition of former Chancellor Olaf Scholz, launched a last-ditch push to kill the heavily lobbied and controversial file altogether, despite major disagreements within the national coalition government. France and Italy both jumped on the bandwagon.
Despite all this, the measure made it through.
Now, the survival of EU supply chain oversight rules is part of the new coalition agreement between the Christian Democrats and the Social Democrats (SPD) in Berlin. In principle, the agreement binds the German chancellor to protect the bill, albeit with a promise to trim the bureaucratic burden in the text. But tensions are simmering beneath the surface.
“Many people would have benefited from the law, but their voices were not loud enough — while the bureaucracy debate overshadowed the debate,” said one German government official, granted anonymity to speak freely about internal political dynamics.
The French U-turn
Macron’s position was far less consistent than Merz’s. He performed a spectacular U-turn to become the No. 1 opponent of a text he and his governments had advocated, at least publicly.
Having been one of the first countries to enact a national law banning human rights abuses and environmental breaches from supply chains, France initially cast itself as a top supporter of the text and made it a priority when it held the rotating Council presidency back in 2022. Then, last year, Paris piggybacked on Berlin’s opposition, requesting that the law apply to fewer companies.
Fast forward to 2025, and the French have become fierce critics of the text. Earlier this year, POLITICO revealed that Paris had asked the European Commission to indefinitely delay the text. That was before Macron told a roomful of business CEOs gathered in Versailles from all over the world that the text should be thrown out altogether.
While the president’s shift is music to the ears of France’s industry lobbies, it has also triggered an internal revolt from his allies who warned against sacrificing green and anti-forced labor rules under pressure from business.
And unlike about a year ago, Berlin and Paris are facing barely any pushback.
Last year, the Greens and the Social Democrats in the former German coalition government voiced their opposition to Berlin’s attempts to kill the bill, before giving in to pressure from the liberals. Now, the Social Democrats co-governing with Merz’ conservative party are mostly quiet.
On Wednesday, the SPD-led labor ministry finally broke its silence, saying it was in “favor of reducing the administrative burden on companies and at the same time effectively protecting human rights.”
Calls to alleviate the burden for businesses, it seems, have become the new political consensus.
“The whole narrative has gotten out of hand. And no one is still up against it,” Gardiner said.
Marianne Gros and Antonia Zimmermann reported from Brussels, Giorgio Leali reported from Paris and Laura Hülsemann reported from Berlin.
The post Inside the Franco-German plot to kill Europe’s ethical supply chain law appeared first on Politico.
