by Ambra Visentin
Germany went into recession and the whole of Europe trembles in fear that this ‘virus’ could spread like wildfire. The German economy, based on industry, which accounts for 20% of GDP, is facing profound changes in its economic system at the same time and within a short period of time. Already weakened by the pandemic due to supply problems, the new conjuncture and the war in Ukraine have now deprived it of the ally that supported its highly energy-intensive economy, Russia, and its main trading partner, with a trade volume of 246.6 billion euros (one third of Europe’s total), China. The latter is becoming increasingly independent of German and other exports. Persistent inflation of 7.2 per cent has also reduced domestic consumption in Germany and limited production outlets. The European Central Bank’s benchmark interest rates, raised to curb this inflation, have increased the cost of capital and reduced business investment, raising production costs and making companies less competitive. The result is an overall decline in exports.
Cooperation with the US and NATO
In order to provide cover, Germany seems to be seeking to strengthen transatlantic relations and NATO rather than the European Union. There are several measures that have a negative impact on both European defence and Franco-German cooperation, such as the withdrawal from the French maritime patrol programme MAWS in order to buy US P-8A (Poseidon) equipment. The reasons for this are both geographical – Germany is more exposed to a potential Russian offensive, even in the Baltic – and related to its defence arsenal, as it does not have a national nuclear deterrent like France and the UK. To meet its NATO commitments, Germany has increased its military spending from 1.3% (2010-2020) to 2% in 2022, with annual spending of €80 billion and investments of €100 billion over five years. Of this, €40.9 billion will go mainly to the purchase of F-35 fighter jets (which can carry American B-61 nuclear bombs). A strategy that, together with the creation of the Skyshield anti-missile system, emphasises the advantages of interoperability with American and NATO systems.
Franco-German relations and European leadership
Financial stability, an immovable cornerstone of European policy imposed by Germany, has led to a gradual shift away from the positions of France and other EU member states. While in 2019 the Treaty of Aix-la-Chapelle renewed the Franco-German partnership with the aim of jointly preparing Europe for the challenges of the 21st century, in the same year French President Emmanuel Macron introduced a new diplomatic strategy towards Germany, which can be described as ‘leading from behind’, and inaugurated what he called ‘the era of fruitful confrontation’. This strategy consists of creating large alliances that support his proposals in order to put pressure on Berlin. A system that has worked both in the case of the Next Generation EU programme devised with Italy and in the fight against climate change. At the Sibiu summit in 2019, Macron had indeed organised an alliance of eight countries in favour of the proposal to devote 25% of the budget precisely to climate-saving measures.
Will France take advantage of the German recession to take the battle for European leadership to the extreme? Economists and researchers do not see this as a viable option. Nathalie Chusseau, professor of economics at the University of Lille, points to the strong economic interdependence between France and Germany, on whose cooperation the European Union itself was founded. In fact, 20% of France’s total exports go to Germany, worth 15 billion euros, or 0.1% of the country’s GDP. According to Éric-André Martin, secretary general of the Committee for the Study of Franco-German Relations (CERFA) at the French Institute of International Relations, a Franco-German compromise is always necessary to strengthen Europe’s sovereignty. Germany must therefore face up to its responsibility for the functioning of the EU and share the burden with its partners, first and foremost France.
Ecological transition – no one is saved alone
According to Christian Saint-Etienne, Professor of Industrial Economics at the Conservatoire National des Arts et Métiers in Paris, Germany may be the first country to experience the principle of global economic mutation, linked on the one hand to the strengthening of the Chinese car industry and on the other to the economic difficulties in managing the ecological transition, which raises the problem of large investments dedicated to the green transition that risk causing stagnation. For Chusseau, it is essential to introduce more flexibility in Europe’s debt policy in order to cope with this epochal green shift. The appeal to Germany is clear, it remains to be seen whether Germany will respond or whether we are heading towards an increasingly fragmented Europe.
Cover image: Olaf Scholz, © PES Communications on Flickr
