29 May 2024, 15:19
Benjamin Wehrmann

France and Germany sideline energy spat during state visit as far-right threat looms over EU elections

Macron (left) and Scholz are under pressure to make the EU Green Deal a success. Photo: Bundesregierung / Gaertner
Macron (left) and Scholz are under pressure to make the EU Green Deal a success. Photo: Bundesregierung / Gaertner

One year later than originally planned, French president Emmanuel Macron paid a three-day state visit to Germany that allowed him to reinforce calls for closer European cooperation in the week before the EU elections. Both Macron and German chancellor Olaf Scholz face assertive far-right parties that look set to go strong in the European vote, meaning the two embattled leaders must find a convincing joint vision for the next European Commission to salvage key policy achievements like the Green Deal. Unlike in the year before, energy policy has taken a backseat in government talks this time – but industry representatives say a common stance regarding the transition to climate neutrality will be vital for achieving their shared aim of a European industrial revival.  

A postponed state visit to Germany has given France’s president Emmanuel Macron the chance to demonstrate his pro-European credentials in the week before the upcoming EU elections – and to showcase his unchanged but so far mostly unfulfilled ambition to lead the way on many issues in the union together with German chancellor Olaf Scholz. About one year after delaying the first official state visit by a French president in more than two decades, Macron used the invitation by German president Frank-Walter Steinmeier, the ceremonial head of state, to finally tour France’s largest and most important neighbour country from east to west.

In mid-2023, when Macron’s trip was originally scheduled to take place, the energy price crisis still dominated political agendas across Europe. A split between the EU’s two largest economies regarding the union’s future energy architecture, notably with respect to the use - and funding - of nuclear power, became glaringly obvious at the time. Germany had just shuttered its last remaining reactors, while France pushed for a Europe-wide revival of the technology, arguing that it is indispensable for achieving climate neutrality.

One year on, the energy price hike in Europe has come to an end and the nuclear debate has been appeased for now, allowing the two governments to largely sideline energy and climate policy questions. “Several hurdles in finding common ground on energy policy have been overcome,” Yann Wernert, Franco-German policy analyst at the EU think tank Jacques Delors Centre (JDC), told Clean Energy Wire. Just days before Macron’s visit, the EU Council of member state governments adopted reform packages for the common electricity market as well as for gas and hydrogen trading. Yet, “the mood is still tense when it comes to this topic,” Wernert argued.

Different energy policies continue to put checks on the ability of the two countries dubbed the EU’s ‘engine’ to decide a common energy infrastructure and cross-border grids for electricity and hydrogen. Germany wants to greatly expand them to trade renewable power, while France bets on greater autarchy thanks to its reactor fleet – even if this has proven to be a daring ambition given nuclear power’s own operational challenges, including unplanned shutdowns or Russian involvement in the European nuclear power infrastructure. “This will likely resurface in Europe in the next years,” he added.

For the time being, however, the French president could hope to reinforce the EU’s crucial axis between Paris and Berlin through his visit as a symbol of European unity amid the surge of nationalist forces in the continent’s two largest economies. In a speech addressed to young Europeans in the eastern state of Saxony’s capital Dresden, Macron highlighted that the formerly communist region today sits at the heart of Europe but warned that the EU “could die” if its members fail to take the right steps to keep it together. He had already given the same warning several weeks earlier to French students in Paris, specifying that ahead of security policy and industrial renewal, energy needed “the most fundamental transformation in the future,” adding a hint at Germany’s former overreliance on Russia

French and German leaders hope to quell far-right threat through making Green Deal a growth engine

With Saxony, the French president picked a stronghold of Germany’s far right Alternative for Germany (AfD) party. Like the French Rassemblement National (RN), the AfD principally rejects deeper European integration and hopes for a strong shift to the right in the EU elections that could slow down progress in key policy areas, especially with regard to energy and climate legislation under the EU’s Green Deal. While the AfD does not enjoy the same level of nationwide support as the RN of party leader Marine Le Pen and in recent months suffered from a series of scandals that even led to a rupture with the RN in the European Parliament, it is the strongest party in polls in Saxony and two other eastern German states that will head to the ballot in September. With Germany’s next federal elections due in 2025 and the French presidential elections in 2027, the parties of both Macron and chancellor Scholz trail the far-right in most polls for the EU vote and are under pressure to present a convincing vision for the rest of their terms to quell the populists’ rise.

So far, however, the populist threat has put checks on a decisive push by the two leaders, specifically with regard to economic transformation. Fuelled by the farmers’ protests in early 2024 -- including in Germany after a cut to fossil fuel subsidies, and France -- Macron’s camp “doesn’t want to highlight its climate policy agenda as much this time,” JDC analyst Wernert said. This is despite a majority of people in his country being in favour of more effective climate action – much like their German neighbours. However, the president is wary of the RN’s growing influence and a possible grab for its seats through a no-confidence vote in parliament before his term’s scheduled end. “The fear of new farmers’ protests is prevalent and the RN is happy to further incite them,” Wernert said.

In Germany, meanwhile, the government is desperate to turn the corner after two years of stagnating growth and get on a more solid trajectory bolstered by strong industry exports. Moreover, the German debt brake ruling at the end of last year threw a spanner in the works of Scholz’s administration by forcing it to reroute or downsize large parts of its energy and climate spending. Scholz’s tripartite coalition government has widely been criticised for struggling to present a cohesive stance over a wide range of issues, leading to first calls for replacing Scholz as his Social Democrats’ (SPD) chancellor candidate for the next vote.

Both leaders hope that a joint bet on launching a new era of European industry based on innovation and greater sustainability that is embodied in the EU Green Deal will help them turn the tide before the end of their term. In a joint article for the Financial Times published during Macron’s trip, the two heads of government urged that making the Green Deal work will be crucial for ensuring a thriving EU in the future. After the symbolic part of his state visit, Macron and members of his cabinet therefore met with the chancellor and his ministers at a government guest house outside Berlin to get down to business ahead of the EU elections. The meeting was attended by both governments’ ministers for the economy, research, education, and finance and resulted in a joint agenda for boosting EU competitiveness for the next five years endorsed by both countries.

Already before the meeting, French economy minister Bruno Le Maire and his German counterpart, Robert Habeck, renewed the Franco-German commitment to supporting the incoming European Commission after the election in its aim to boost competitiveness “while upholding our ambition to make the EU the first climate-neutral continent in the world.” An estimated 620 billion euros per year were needed to make the Green Deal and related programmes “a growth agenda for Europe,” which will also require reduced bureaucracy to fill gaps in public funding with private investments.

Industry calls for European approach to transformation instead many national ones

Germany’s industry backed the two ministers’ general positioning on Europe’s path to climate neutrality: “Public funds should be used in a targeted manner to incentivise private investment,” the Federation of German Industries (BDI) told Clean Energy Wire. This would help spur the development of renewable power, hydrogen, circular economy principles and carbon management procedures, such as CCU or CCS, that underpin the continent’s industrial transformation, the lobby group said. The next European Commission thus had to “take a look at the Green Deal’s components” to improve the framework’s balance regarding environmental and economic effects.

National governments in Europe should be “principally thinking of the industrial transformation in a more European way,” the BDI added. While prices on energy markets have gone down significantly since their peak in 2022, major challenges to the competitiveness of European producers remain. Industrial companies expect power and gas prices to remain above their historic levels for the foreseeable future and lobby group BDI warns against “a significant disadvantage” in competitiveness compared to other world regions, such as the U.S., where wholesale gas prices in 2023 only amounted to about one quarter of those in Europe.

To avoid an erosion of Europe’s industrial basis, green industries must become mature enough to carry the transformation themselves, the group said. Sufficient renewable power capacities at affordable prices would be the key for achieving this, it added. At the same time, scaling up green industries could happen much faster and more efficiently if a joint European support approach is found.

Moreover, the pressing question of possible trade restrictions due to alleged dumping by Chinese imports in transition technologies, such as electric vehicles and solar panels, on which Scholz and Macron have so far taken vastly different stances, should be answered with one voice. France and many other EU governments are ready to hike tariffs if an ongoing EU probe finds China in violation of trading rules. Germany’s chancellor, on the other hand, has so far been sceptical towards the idea as it is seen as a threat to Germany’s export-based business model due to possible retaliatory measures from Beijing. After the U.S. had drastically hiked tariffs on Chinese imports on precisely these grounds, the EU could no longer dither, the BDI said. Applying trade restrictions in the EU would follow clear rules and “available instruments should be used as intended,” the group said.

According to JDC policy analyst Wernert, the French and German positions on the requisite level of state intervention for achieving goals in industrial policy have already “significantly converged” in recent years – and both countries also scoop up the lion’s share of support granted at the EU level. However, Paris and Berlin remain split over the degree of granting joint European funding, about which Germany as the more solvent partner in the tandem is traditionally more cautious than France. Investment needs for decarbonisation and the launch and expansion of a green industry will play a large role in the French plans for the upcoming European Commission’s agenda. “In order to address this and to secure crucial funding, Germany plays a central role” in the French government’s plans, Wernert argued. This became apparent when Macron in Dresden called for doubling the EU budget, a measure that his joint FT article with Scholz did not mention.

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