A deep recession triggered by the Ukraine conflict has opened up yawning fissures in the European Union. And Berlin is precipitating the crisis with its unilateral actions.
At the first signs of a deep economic recession in Europe, serious rifts are developing between the European Union's two powerhouses, Germany and France, over multiple issues, including energy, defence and international trade.
It was all rosy until a high-level ministerial meeting between the two countries was cancelled last month, surprising most experts and government insiders alike about the extent of the fallout.
To measure the significance of that meeting consider that French President Emmanuel Macron and German Chancellor Olaf Scholz, along with their cabinets, were scheduled to meet and sign several agreements in October. This would have been Scholz’s first annual Franco-German ministerial council meeting, but the two countries couldn’t agree on the agenda.
The reason for the fallout runs around the EU’s energy and defence policy and how to deal with China.
The 27-nation bloc has so far failed to agree on the energy price cap – clearly a sour point – which is meant to protect the EU as a joint entity and negotiate with international gas suppliers as a more substantial client, buying large amounts in bulk at cheaper rates.
While Europe debates its energy price cap, many European countries are taking unilateral decisions. Germany, in particular, has caused serious alarm across Europe after some of its policies have been termed “selfish”.
Berlin, under considerable domestic pressure due to rising food and energy price inflation, three-way political coalition discord, and the war in Ukraine, recently announced around $208 billion energy subsidy for households and industry.
That announcement has caused serious concern in Brussels and other European capitals. France, in particular, is deeply unhappy, and Germany’s actions threaten European businesses.
The subsidy will allow German businesses an unfair advantage over their European competitors and, therefore, negatively affect the internal market.
French diplomats have said that they feel Germany is throwing its weight around and taking decisions that are sometimes against French interests.
French officials say they worry that the multi-billion dollar German plan could distort the European market because other countries do not have the same means to protect their citizens.
The German initiative has also highlighted the divide between wealthy EU countries that can afford new loans while cash-strapped EU governments are desperately looking for sources of funding.
Another point of serious concern and German unilateralism is how Europe is looking to defend itself in the face of Russian missile threats.
Missile strikes across Ukraine have sent waves of panic throughout the region, with many countries hurriedly making plans to spruce up their own air defences.
At a recent NATO meeting, a German-led network of 14 countries signed a deal on a new air defence system called the European Sky Shield Initiative. This is where the total and absolute fallout of French-German relations come to rest. The initiative, which aims to create a joint air defence programme on the continent, does not include France.
The shield will comprise German, American and Israeli systems, greatly annoying the French, who have long advocated the idea of ‘European sovereignty’.
France is already developing its own air missile defence shield together with Italy, but Germany’s unilateral approach indicates the forming of smaller military huddles within Europe.
Last year, both the EU and the German leadership signalled the rise of China as a global superpower, alongside the US. This has led the EU to sculpt its own relationship with China in the face of rising opposition from the US.
Rising fresh out of Russian oil and gas dependencies, French policymakers have reiterated the need for a united front against the creation of EU-China dependencies. In October 2021, a report by the French institute for military strategy, IRSEM, found that “economic pressures were by far one of China’s most powerful diplomatic levers” in Europe.
This poses a serious problem for Germany, as China is one of its largest trading partners and the two countries traded goods worth nearly $260 billion last year.
So, when the Chinese came to buy a stake in Europe’s second-largest port in Hamburg, Scholz rejected all European and local concerns to greenlight the sale.
In another instance, Scholz’s trip to China with a group of CEOs from German blue chip companies signalled to France that Berlin was ready to go it alone.
That’s because Scholz had reportedly rejected an offer by Macron to come along to send a signal of EU unity. France wants to make Europe an important geopolitical centre, but this can only happen if France and Germany work together to cement themselves in a position between the US and China.
But Scholz is clearly opting for protectionist measures in favour of German businesses and not the entire EU. Relations between European countries have not been this bad in decades.
Jacques-Pierre Gougeon, an expert on Germany at a Paris-based think tank, told German media that the current low in French-German relations is very serious and that “some smaller EU member states, such as Poland and the Baltic states, are questioning (the) Franco-German leadership”.
As institutional panic sets in at Berlin, where there are real fears that the country will run out of gas this winter, business insolvencies are on average 30 percent higher, and the risk of all-out war reaching Europe is very real. By the signs of it, Germany could be ready to leave the EU behind and go it alone.
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