France and Germany Grapple over “Correct” EU Economic Policy

Scholz (left) and Macron (right) discuss EU Economic Policy with European Commission President Ursula von der Leyen (Wikimedia Commons)

German Chancellor Olaf Scholz welcomed French President Emmanuel Macron to the Berlin Global Dialogue Conference to discuss the future of EU policy on October 2, 2024. They addressed escalating tensions in the Middle East, tariffs on Chinese electric vehicles (EVs), and the future of Europe. As it turns out, Paris and Berlin have been pursuing divergent economic policies. 

The key issue has been trade. French President Macron warned that the EU “could die” if it continued with a classical free-trade agenda. He stated that the EU must embrace a protectionist approach if it does not want to be “pushed out of the market.” German Chancellor Scholz, however, iterated that protectionism “must not lead to us harming ourselves.” Scholz is expected to vote against imposing tariffs on Chinese EVs, after drawing up opposition to this move in Germany. 

Germany’s reluctance to impose tariffs on China stems from its powerful auto industry, which fears disruptive countermeasures from China’s side. Berlin, in recent years, has preferred an open-dialogue policy vis-a-vis Beijing. Macron believes that the induction of Chinese EVs in European markets has created a “bias,” harming European industrial ventures. 

Scholz, with powerful auto-makers like Mercedes-Benz and BMW backing him, emphasized negotiations with Beijing on EVs and redirected worries to areas where China was “actually damaging our economy, such as steel.” Macron pessimistically voiced concerns about the EU falling behind China and the United States in its production possibilities and outcomes.

While both countries agree with the Draghi plan publicly, privately they have reservations. The disagreement between France and Germany chafes further; while France has called for raising the debt ceiling to invest in Europe, Germany believes that this policy is misguided. Domestic politics have been interfering with the international economic policies both countries are pursuing. These disagreements have led to Germany and its allies blocking a proposal of joint borrowing by the EU to finance critical sectors like defense. Internal turmoil had limited France’s influence over this proposal. 

French Senator Ronan Le Gleut, president of the Franco-German Senate friendship group, said, “We just don’t have the same interests. 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.”

Both countries have agreed to promote digitization and energy efficiency by redirecting funds from the EU’s poorest regions. Currently, the EU pays 158 percent more than the US for electricity and 345 percent more for natural gas. Other concerns relate to maintaining a competitive edge when it comes to AI, pharmaceuticals, and innovation. To secure Europe’s future in an increasingly multipolar world, it is important that the two most important countries of the EU reach a consensus.