The EU will not have an easy maneuver in approaching and joining another White House occupied by Donald Trump. The return of the Republican president has caught the EU on the wrong foot. To a large extent, due to the alarming, coincidental and risky crisis of political and economic identity into which the Franco-German axis has entered, the gear that makes the Union’s engine room move.
Not because Berlin and Paris did not envision the arrival of a more complex Trump version – with positions in the federal Executive with greater professional, business, political or financial background -, more radical, with an oath of fidelity to MAGA – the Make America Great Again that has digested (and perfected) the America, first of his first term – and more ideologized, through the work of the Heritage Foundation and its Project 2025 loaded with tax cuts, recipes for trade protectionism and sectoral deregulations. But because the preference of Emmanuel Macron and Olaf Scholz was towards a continuing Democratic Administration, with Kamala Harris at the head.
On 5N, election day in the US, the president of the European Commission, Ursula von der Leyen, met with the community ambassadors to the EU. Crossing my fingers, waiting for the smoke from the polls outside white and the fluid was maintained status quo transatlantic forged during Joe Biden’s term with the election of his number twoHarris. But the Democratic leader lost the “most relevant elections in half a century,” as defined by the consensus of international observers.
He shockHowever, it was short-lived. The idea immediately took shape that “the EU must recover quickly and reset ties with Trump that will have to explore other paths,” noted several of those diplomatic voices. From the “success story –win to win in terms of the prosperity and security of transatlantic ties”, which will require, in any case, “unity and discipline on the part of the Union’s partners”.
But the realpolitik Europe is far from being temporary. Almost without reason for continuity, in just one month, the German social democratic chancellor collapsed his traffic light coalition With the resignation of its head of Finance, the liberal Christian Lindner, it agreed with the conservative CDU on a vote of confidence doomed to lose that was consummated this week, and brought forward the elections eleven months, to 23F.
Meanwhile, the French president confirmed how the motion of censure of the Popular Front that won in the July legislative elections and to which the extreme right joined, bent the elbow of the former super commissioner, the conservative Michel Barnier, left the 2025 budget in a mess and Against all parliamentary logic, he appointed the centrist François Bayrou as prime minister. With the optimistic idea of overcoming the double blockade of Marine Le Pen’s National Group and the left-wing alliance that took down the European Brexit negotiator.
Political collapse obstructs the German locomotive
The Franco-German identity crisis arises at a time of maximum emergency for Europe, which urgently needs to wake up to adapt to or counteract the effects of the aggressive Trump Administration. The altercations ravaging Berlin and Paris are not only political in nature. The two great powers of the euro are the current economic patients of the internal market.
In this context, the EU’s muscles are no longer frightening. With the axis out of gear, the war in Ukraine without military advantages of any contender, Trump dusting off threats to European NATO partners to cover defense expenses with at least 2% of GDP, Scholz invoking the Zeitenwendethe historic point of return to the militarization of the country, Macron in the midst of humility in his attempt to be the European geostrategic leader due to domestic tensions and Europe, in general, distracted by the new preferences of his voters for immigration control, the erosion of their purchasing power or the high cost of their health systems, largely arising from neoliberal or ultra-conservative hoaxes.
These are some signs that the EU does not seem prepared to confront affronts from its partner on the other side of the Atlantic regarding the European trade surplus or the massive invasion of automobiles. made in Germany that has left Trump’s electoral trail or his obsessive demand for a ceasefire under threat of stopping financing the kyiv Army. Two sensitive issues for Berlin, whose government collapsed at the same time as the triumphant proclamation of trumpism.
The future German chancellor must guarantee public resources and massive investments to modernize its infrastructure network, especially energy, increase its Defense capacity and accelerate its technological innovation and climate neutrality processes on which it has relied on its rebound in productivity. Although for all this to translate into higher competitiveness ratios, the economy will need to become more dynamic, which requires, first, the revival of its weak industrial activity. The euro’s largest GDP has plunged into recession for the second consecutive year. To a large extent, due to the blackout of its foreign sector due to the sluggishness of trade, the still unsurpassed energy dependence on Russia, the legacy of a quarter of a century of diplomatic and geostrategic errors of the first order – admitted even by Angela Merkel – and, above all, through an unprecedented industrial loop in the German locomotive since the post-world war.
“No industrial sector is optimistic for 2025”, so the future government “will have to work hard” to restore lost confidence, with a third of German companies with prospects of a worsening economic outlook, 56% with no signs of turn the tables and only 13% expect to increase their income and profits, summarizes Klaus Wohlrabe, analyst at the Ifo Institute. “And 2024 has been another dramatic year,” he remembers.
As if that were not enough, Scholz and Friedrich Merz, the CDU/CSU candidate who dominates the polls with 31% support, ahead of the 19.8% of the far-right Alternative for Germany (AfD) and 17% of the SPD of Scholz – with the Greens (11.2%) and the refounded left of the BSW with 7.5% of voting intention closing the hemicycle of the Bundestag- differ in tax matters, in the deployment of investments or in debt management.
Merz and Markus Soeder, their ticket Bavarian Christian Socialist Markus Soeder, want to save 100 billion euros in social and immigration expenses, reduce personal income tax, continue supporting Ukraine or comply with the constitutional mandate to curb debt, although without clues about the budget financing formula. The ideological debate, then, is launched. Also in the leading European power.
“Germany must lay the foundations for its future by increasing its productivity and urgently combating the causes of its excessive energy costs,” warns Martin Ademmer of Bloomberg Economics.
The French parliamentary labyrinth grips its public accounts
The French political chaos has also trapped the economy, which barely rose 2 tenths in the first half of 2024, with paralysis of internal and external demand and the private sector and Barnier’s budget equation without clearing up: the adjustment of 60,000 million euros with spending cuts (two thirds, according to the former prime minister) and tax increases with which to correct a deficit that will end the year at 6.1%, more than double the limit of stability required by the EU, despite the cancellation of social programs. “France lives beyond its means,” admits its governor, François Villeroy de Galhau.
Moody’s assumes this warning. The rating agency has lowered its grade one notch, to Aa2 – and three below its maximum rating due to the “deterioration of its public finances” and the repeated failure of its politicians to agree on structural reforms. The rest of the triumvirate that governs the credit markets – S&P and Fitch – are considering following in their footsteps. This scenario, says Jens Peter Sorense, of Danske Bank, “could change the normal tranquility of investors regarding French bonds.” Moody’s report highlights “the risk of a rise in financial costs”, which “would weaken France’s debt service” and “could generate a vicious circle of increasing deficit and debt levels that would increase annual credit needs”.
In a year, 2025, in which “growth will be modest,” warns Dorian Roucher, economist at Insee – the French Ine -, with public spending at a standstill, companies in the middle of an investment fog, foreign sales interrupted and consumers tightening their pockets. Bayrou will have to deal with three large opposition blocs in Parliament to prevent the state from stopping paying for his services on January 1.
In this scenario, it is not surprising that Christine Lagarde regrets that the two euro powers have “inflicted” themselves doses of political uncertainty and that their reformist and fiscal disputes give Trump wings in his intention to create commercial and security disruptions with Europe. Or that the ECB warns that the process of lowering the price of money cannot only address the Franco-German economic weakness. While Europe works to coordinate its industries to address the protectionism applied by its global rivals – the US and China, but also emerging markets such as India – and meet its economic security requirements, the IMF recommends, and to finalize its roadmap to win competitiveness, according to Mario Draghi’s criteria.
European leaders “need to accept as soon as possible the reality of another Trump Administration to protect the interests of the club,” says Ian Bond, deputy director of the Center for European Reform (CER), because “the one that is about to begin will not only emit signals of alarm”. For this reason, the EU “should not be fragmented” – highlights The Economist– “nor get lost in sterile debates such as the constitutional debt brake in Germany […] because Europe cannot afford to wait months without addressing urgent reforms or the geostrategic changes that Trump will propose.”
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