“Germany is going through a structural change whose destabilizing effect should not be underestimated.”
This is how the French president put his words Emmanuel Macron In an interview with Les Echos magazine (you will switch to another service) last week. Arriving at the EU summit at the end of the week, Macron warned Germany not to “isolate” itself from the rest of Europe.
It has not remained unclear that Macron is annoyed. Relations between Germany and France are at a record low. The compromise machine is broken, the former French EU ambassador describes Financial Times (you will switch to another service) according to the magazine.
The Germany-France duo has traditionally supported EU cooperation. It means that one country has represented a roughly northern view and the other a roughly southern view. Now the duo is in bad shape.
– The importance of the Germany-France axis has been emphasized especially since the beginning of the 2010s in the solutions to various crises. If that axis is broken, then the general interpretation is that the reforms that would lie ahead will remain unfinished, Academy researcher at the University of Helsinki Timo Miettinen says.
The weakening of the gap shifts the axis of power in the union. At least the politicians of Poland and the Baltic countries has already been heard (you switch to another service) have demanded a stronger position for their countries at the EU tables, because their Russia line has been brighter than Germany and France during the Ukrainian war.
Finns should also be interested, because it is not only about the price of electricity but also, for example, the national debt and relations with the sovereign powers of the East.
Last week may have been the climax of the relationship problems between Germany and France, but there are more wrinkles ahead. It means an EU that is more disjointed than usual.
Germany and France were due to meet for their annual autumn meeting of governments on Wednesday, but the meeting of ministers was canceled for “scheduling reasons”.
Political observers did not believe the explanation any better In Germany (you switch to another service)than Even in France (you switch to another service). They concluded that the meeting was not worth it when there are too many issues.
However, with this information, Scholz will travel alone as Macron’s guest to Paris to reconcile the differences on Wednesday.
1. Germany went solo with subsidies
There are many reasons behind mutual distrust, but the most divisive of them is energy. The German economy is in a big transition due to the gas crisis.
Macron has taken a liking to Scholz because he recently announced a huge 200 billion euro aid package without warning other countries.
It is now feared that the subsidies will distort competition in the internal market, and thus also affect Finnish companies.
Germany is able to give its companies billions of euros, when others cannot afford similar subsidies. For example: Germany could support its car factories more generously than France, Italy or Spain, in which case the German brands would win in an unfair situation.
– France is disappointed that there was no coordination but soloing at the European level, and it also led to the cancellation of the ministerial meeting, Miettinen estimates.
EU energy ministers should make further decisions on energy price mechanisms today, Tuesday, on which the heads of governments and states have not reached an agreement in their two summits. A third summit may be needed on the subject.
2. Completely different lines on the gas price ceiling
The biggest disagreement concerns the price ceiling to be set for gas.
France and the southern countries of the EU are pushing for an upper limit that would only apply to the price of natural gas used in electricity production. This would increase the electricity produced with gas, which would lower the price of electricity.
For Germany, the model is difficult to accept, because the diversion of gas to electricity production would cause a decrease in gas on the market. In the model proposed by France and the countries of the south, German households and industry would be excluded from price regulation.
Homes and factories in Germany are not heated with electricity but directly with gas. The cheapening of electricity produced with gas would therefore not bring relief to the Germans.
It is easy for Finland to have an open attitude to both models, because the share of gas in our energy was small from the beginning. It has shrunk even more since the start of the Russian war of aggression.
Any price ceiling model that lowers the price of electricity is suitable for Finland.
3. Germany can repeat Russia’s mistakes in China
The relationship with China is also a big problem. France fears that Germany will rely too much on eastern countries in its economy.
As a result of China’s party congress that ended on Sunday, power is even more concentrated in the president to Xi Jinping. Read more: “Bad news for the whole world”, says an economist about the announcement of the Chinese Party Congress – investors were also frightened by the new appointments
However, German Chancellor Scholz plans to head to Beijing as soon as next week with a large business delegation. It speaks of intentions to rub new stores.
To top it all off, he refused (you switch to another service) About Macron’s offer to visit China together. The duo’s joint visit would have signaled a united Europe. The Baltic countries, among others, have also hoped for the unity of the EU countries in relations with China.
Even in your home country (you switch to another service) Scholz is accused of still looking only at Germany’s economic interests and ignoring the political risks associated with China. China has become Germany’s largest trading partner in recent years.
Germany made miscalculations when relying on Russia for gas and oil purchases. It still has to hang on as Russia’s second largest buyer of fossil fuels.
Now Scholz seems to be continuing the series of mistakes by focusing strongly on China in foreign trade.
A good example is the fact that Scholz also supports the sale of the port of Hamburg to the Chinese state-owned company Cosco, despite voices of protest.
4. Russia sanctions are getting harder
As a result of the energy crisis, Germany’s economy is going through such a big slump that it may be difficult for it to accept any more severe sanctions against Russia. The EU countries must accept the sanctions unanimously.
– When we know how difficult it was, for example, to get oil on the sanctions list, then of course unity in relation to Russia’s activities in the future is a concern. In other words, how united will Europe’s lines remain in sanctions policy and, on the other hand, in issues such as arms exports, says Timo Miettinen.
However, Germany is not the biggest threat to the common EU front. There may also be rifts within the EU from Italy, the third largest member state of the Union.
There is now a new government that is partly pro-Russian and partly EU-critical. Nationalist by Giorgia Meloni the relationship with Russia may become the biggest problem of the government led by
5. On different lines, also about debt
The most recent example of deep disagreements is that this week the EU Commission once again decided to postpone its presentation of the economic rules, the so-called stability and growth agreement (you switch to another service) reformation.
It was supposed to announce its plans tomorrow, Wednesday, but now the announcement has been delayed by two weeks.
In recent years, the EU countries have broken the rules they have drawn up themselves regarding state indebtedness and budget deficits. The process of reforming the rules was interrupted by the corona pandemic, and the commission restarted its preparation last year.
Everyone admits the need for reforms, but there are big differences of opinion on what kind of adjustment to the rules would be needed.
Even though the package usually changes during the processing of the member countries, the Commission should not publish a proposal whose most important points are not accepted by the member countries. France pursues a more relaxed approach to debt and the room for maneuver of state budgets than Germany, for which debt has traditionally been a red garment.
More about reforming the financial rules: The EU is already facing the next gigantic economic dispute over the budget discipline of different countries – Researcher: “A much bigger thing than what the recovery fund was”
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