Franco-German Divergence and the Future of European Integration
- Tommaso Paletti and Samuele Quarantinin
- 4 hours ago
- 9 min read
Context
"For years, the European Union believed that its economic size, with 450 million consumers, brought with it geopolitical power and influence in international trade relations. This year will be remembered as the year in which this illusion evaporated." said Mario Draghi during the Rimini Meeting on 22nd August 2025.
In order to grasp what Draghi was referring to, one should think about the international environment in which Europe operates nowadays. The Russian invasion of Ukraine in February 2022 definitely destroyed the post-Cold War illusion that large-scale conflict had disappeared from the European continent. At the same time, Donald Trump’s return to the White House at the beginning of 2025 has reinforced a harsher view of transatlantic relations, one in which tariffs and transactional diplomacy shape economic relationships between allies. For Europe the message is clear: market size does not substitute for geopolitcal leverage, technological capacity or financial sovereignty.
This is precisely why Draghi’s role matters. He is not only a former President of the European Central Bank and former Prime Minister of Italy; he is also the author of the report that has become the clearest manifestation of Europe’s structural weaknesses. It was commissioned to design a strategy for the Union’s future and although some of its ideas have influenced Ursula von der Leyen’s 2024-2029 Commission agenda, implementation has so far remained partial and slow (an independent analysis from the European Policy Innovation Council in collaboration with Kefim found out that only 10% of the actual recommendations have been implemented so far). The real question is therefore not whether Europe understands the problem, but whether it is politically capable of acting to solve it.
The French view: Eurobonds and “Buy European”
By Tommaso Paletti
If there is one capital that is trying most consistently to push Europe from market to strategic integration, it is Paris. France has long argued that the EU cannot remain an economic giant and a geopolitical dwarf. From Macron’s speeches on European sovereignty to the French push for common defence funding and deeper capital markets, the underlying argument has remained quite the same: in a world of great-power competition, Europe needs collective tools that match its ambitions. This is also why France keeps returning to the idea of eurobonds. In its view, they are not just an emergency instrument to be used in times of crisis, but part of a broader attempt to give the euro area what it still lacks: a truly common safe asset, large and liquid enough to attract global investors and strengthen the international role of the euro. The issue has come back to the fore because the EU is now expected to fund more defence, more industrial policy and more cross-border investment, all while still operating with a fragmented fiscal structure. From the French perspective, it is hard for Europe to speak seriously about sovereignty if it still lacks a financial instrument with the scale and credibility of US Treasuries (and US dollar in general).
What makes the current debate different is that common debt is no longer discussed only as solidarity between stronger and weaker states. It is increasingly presented as a tool of power and, in reality, a practical precedent already exists: through SURE and NextGenerationEU, the European Union has shown that it can borrow jointly on a very large scale. The question now is whether Europe is willing to make emergency improvisation more permanent.
This is why the French case matters beyond France. Paris sees common issuance as a way to lower financing frictions for important investment, deepen European capital markets and send a political signal that shared priorities can be backed by shared resources. Critics, particularly in northern Europe, still worry that making common debt permanent would weaken incentives for fiscal discipline and gradually turn the euro area into a system of permanent cross-country transfers. The issue now, though, is that Europe already has common debt but what it still lacks is a stable fiscal architecture behind it.
The same logic just described reappears in industrial policy. If eurobonds concern the financial side of sovereignty, “Buy European” concerns its productive side. France argues that a continent dependent on many external suppliers for green technologies and parts of its defence-industrial base cannot fully convert market size into autonomy. In that sense, European preference is presented not as protectionism for its own sake, but as an adjustment to a world in which the United States subsidises aggressively and China dominates major clean-tech supply chains.
The Commission’s proposed Industrial Accelerator Act captures much of that reasoning. It would use the enormous purchasing power of public procurement (more than €2tn a year or roughly 14 per cent of EU GDP) to support domestic production in selected sectors. The draft includes local-content and low-carbon requirements for areas such as batteries, solar, wind, hydrogen and nuclear power. In some cases the thresholds are very concrete: electric vehicles bought with public money would have to be assembled in the Union, with 70 per cent of components excluding the battery made in Europe.
And this, too, is what divides the EU. France has consistently argued for tougher European preference rules, while more liberal member states worry that stricter local-content requirements would push up costs, discourage investment and risk retaliation. Germany remains somewhere in the middle, more sympathetic than in the past but still cautious. What emerges is a very familiar European pattern: there is growing agreement that resilience now matters far more than it once did, but much less agreement on how much openness Europe is actually willing to give up in order to achieve it. Behind this tension lie some of the biggest pressures shaping the continent today (rearmament, a less globalised world, the race for green industry and the desire to reduce dependence on a financial system still dominated by the dollar). In that sense, the French view is perhaps seen not as a finished plan for Europe’s future, but as a warning about Europe’s present condition. The EU is already too politically and economically intertwined to remain just a market, yet it is still not integrated enough to behave like a real strategic power.
The German view: Defense Industry and Trade
By Samuele Quarantini
When it comes to European integration, the Franco-German partnership has been essential because, by combining their political weight and coordinating positions, they were able to broker compromises and provide the leadership needed to overcome crises and advance common EU projects. The issue is that Franco-German relations are at an all-time low: France opposed the agreement between the EU and Mercosur, which Germany supported; France blocked the use of frozen Russian assets to fund aid to Ukraine, a scenario personally backed by chancellor Merz; and there appears to be no progress on the French-German sixth-generation fighter jet project launched in 2017. With regard to the latter, the Future Combat Air System (FCAS) project was already born with serious critical issues. The French government wanted 80% participation instead of splitting it equally, and the French military wanted a jet that could carry nuclear weapons and be capable of landing on aircraft carriers. Germany has neither nuclear weapons nor aircraft carriers.
This crisis has led Germany to a convergence of interests and views on European integration with other Member States, such as Italy. After the intergovernmental summit between Italy and Germany on January 23rd 2026, officials made it understood that Germany is seriously considering the Italian–British–Japanese version of the project, also known as the Global Combat Air Programme (GCAP). But that’s not all: Germany and Italy are aligned on specific dossiers such as deregulation and the strengthening of the European Single Market, a much more export and trade-oriented policy than France’s, reflecting the economies of the two countries. In addition, Merz getting closer to Meloni is a realpolitik tactic, since France is holding presidential elections in April 2027, and the far right and far left are ahead in the polls, while the Meloni government seems (or at least is perceived as) relatively stable.
Berlin’s shift away from Paris fits within a broader German strategic reorientation, rooted in the Zeitenwende announced by Olaf Scholz in 2022, which marked a historic turning point (Zeitenwende literally translates into “times-turn”) in Germany’s defense, energy, and foreign policies following Russia’s full-scale invasion of Ukraine.
Regarding defense policy, there is no doubt that Germany is building up the strongest army in Europe. As Federal Chancellor Friedrich Merz said at the 2026 Munich Security Conference (MSC): “As I have often said, and reiterate here, we will make the Bundeswehr the strongest conventional army in Europe as soon as possible – an army that can resist if it has to.” These words might have been frightening in the XX century, but are not so scary anymore. Germany’s military must “spend more and produce more,” declared NATO Secretary-General Mark Rutte in 2024. This new view of Germany’s military does not come as a surprise. The Kiel Institute’s Ukraine Support Tracker data shows that Germany has been by far the largest contributor to Ukraine’s defense among the 27 EU Member States. Countries like Poland, the Baltics, and the Nordics have strongly supported this new German repositioning as the new bastion of NATO. The Economist commented, “This time they were invited,” as German tanks entered Vilnius on May 22nd 2025, the Lithuanian capital once occupied by the Nazis. This is the first German permanent deployment since the end of World War II. Germany’s defense spending is set to rise sharply, with the 2026 budget marking a step-change toward a projected €152 billion (3.5% of GDP) by 2029, more than doubling 2025 levels.
Despite Merz saying that “Uniting and bolstering European sovereignty is our best response” and that “Never again will we Germans go it alone” in a recent article on Foreign Affairs, reality depicts a different scenario. Germany is exploiting an exception in EU competition law (which generally prohibits State aid to national companies, as it distorts competition within the European Single Market) that allows Member States to skip notification and clearance procedures from the European Commission for the public funding of national defense industries when such spending is a matter of essential security interests. Hence, instead of fostering the Europeanization of national defense industries and favoring a single market for weaponry, Germany is using its unmatched deficit capacity to support its national defense manufacturing sector, seen as the main way out of economic stagnation. The ideal solution would be for the European Commission to engage in large-scale joint borrowing for defense, like the Eurobonds during the COVID-19 crisis, especially considering that the current EU SAFE scheme is totally inadequate, as it allows only small conditional borrowing programs. However, although the long-standing taboo on public debt has been loosened within German fiscal policy, the fiscal conservatism of German policymakers remains resistant to the mutualization of public debt at the European level. The worst-case scenario is that German national rearmament, combined with the alarming prospect of a future AfD-led government characterized by anti-EU positions and ties to Russia, might prompt other EU countries to act unilaterally as well, leading to European fragmentation instead of integration. France and Italy, for example, have defense industries competitive enough to match their German counterparts, but deficit capacities that are not even remotely comparable to those of Germany. Putting pessimistic scenarios aside, this new chapter of European military history will probably give the EU more deterrence on the global stage, with its richest Member State becoming the strongest military power as well. As Merz said at MSC 2026: “We are not doing this by writing NATO off, but rather by establishing a strong, self-sustaining European pillar in the Alliance”.
Regarding trade and EU external policies, Berlin has been considering “Buy European” policies for the first time, although not to the same degree as French protectionists. Germany is an exporting economy, considered one of the three main hubs of Global Value Chains (GVCs), alongside the USA and China. Therefore, a tougher approach to imports would certainly bring blowbacks. The German response has not been clear on this matter yet, but it is obvious that we are in a reassessment phase of global trade. China’s market, in particular, has begun to dry up for German exporters, as Chinese domestic demand remains low for foreign imports. On the other hand, Chinese exports to Germany have grown steadily thanks to higher product quality, but also due to massive Chinese government subsidies to its industries and unfair competition. So far, Chancellor Merz has urged Beijing to appreciate its currency to stimulate demand for imports and remove unfair subsidies to industries that are flooding European markets, warning that protectionist ideas are making their way into the EU as well. At the same time, German Defense Minister Boris Pistorius embarked on a mission in the Indo-Pacific in March 2026 with the aim of derisking on China. In particular, Germany is working to secure a deal on lithium and rare earth materials with Australia, which is the only significant player after China.
Despite Chancellor Merz engaging in foreign policy much more compared to his predecessors (he has been nicknamed "Außenkanzler" or “Chancellor of foreign affairs”), he has been struggling to implement reforms at home, except for the defense industry. The reforms promised in healthcare, economic competitiveness, energy transition, immigration and the labor market, digitalization and bureaucracy, and infrastructure have been substantially stalled due to the weakness of the government in domestic politics.
Conclusions
To conclude, it is not clear whether the French or the German view on the future of European integration will prevail. What is clear, though, is that the EU is moving towards a two-speed Europe instead of full consensus among all 27 Member States. The sense of urgency driven by global competition and crises has been acknowledged by EU leaders, who are now organizing themselves into flexible coalitions. Other Member States have realized that they do not have the time to wait for a convergence of interests within the Franco-German dominance on key issues such as Eurobonds and “Buy European” policies.
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