German Chancellor Friedrich Merz declared total opposition to joint EU debt at the informal summit held recently at Alden Biesen Castle.
Emmanuel Macron urged European capitals to launch future-oriented eurobonds days earlier and cautioned that the continent is falling into a trap of strategic weakness by refusing common borrowing.
Berlin answered the proposal swiftly. A senior official close to Merz said the eurobond talk is a distraction from the fundamental problem of how much Europe produces in total.
The rejection exposes a familiar script in the quarrels between France and Germany. The pair of governments promise partnership even as they advance irreconcilable blueprints for recovery.
A Semantic Battlefield
Merz has lobbied against the phrase ‘Made in Europe’ because he fears it might alienate foreign investors. His preference leans toward the language of Made with Europe. The distinction sounds like a dry detail but carries the heavy consequences of the future of the single market.
Made in Europe implies a system of minimum quotas for European parts in goods bought with public funds. France advocates for strict minimums in government contracts.
On the other hand, the Made with Europe concept implies a commitment to open markets that permits foreign participation through joint ventures.
Slovenian Prime Minister Robert Golob said the Made in Europe principle is being developed by a coalition of states that want to move at a faster pace. The remark points to a plan for cooperation among a small group of willing states that could eventually leave behind the more reluctant members.
Germany Opts for Cooperation
Berlin has moved closer to Rome on questions of economic muscle.
Germany and Italy are advancing a trade agenda that prioritises global access. Italian Prime Minister Giorgia Meloni promised both Brazilian President Lula and Merz she would support the Mercosur deal despite the fierce objections coming from France.
The German chancellor treats productivity as the ultimate priority for the continent. His government explained it opposes common debt because the real conversation needs to be about the continental output problem.
The framing portrays French worries about industrial autonomy as a secondary concern. Merz also encounters legal barriers at home. The chancellor cited spending limits imposed by the Federal Constitutional Court as a definitive barrier to supporting eurobonds.
France Stands Alone
Nordic and Baltic countries want the Mercosur agreement implemented with haste and the Dutch share the same drive. France is a lonely defender of its agricultural sector as the rest of the member states prioritise gaining wider market access.
Spain is likely to back both eurobonds and the Made in Europe preferences for low-carbon steel according to government sources. Madrid provides Paris with a rare bit of southern support.
But the Spanish backing may prove insufficient to overcome the growing union between Germany, Italy, and the northern European states.
The French president is speaking with a sense of once-in-a-generation necessity. Macron hinted that an EU summit in June should be the final stop for such decisions. He proposed moving forward with a smaller group of members if the full group of twenty-seven states cannot agree to advance together.
The Productivity Diagnosis
Berlin insists that the malaise in the European economy is a crisis of low productivity at its core. Such a diagnosis leads to a preference for regulatory simplification. France stays focused on the need for strategic investment through common debt instruments.
Merz said that special measures regarding European debt are becoming a permanent fixture of the budget. He pointed to the coronavirus recovery funds and assistance for Ukraine.
His government views the measures as strictly temporary responses to crisis as Paris views the funds as the foundation for a permanent mechanism. The focus on productivity serves as a polished way for Berlin to safeguard its own advantages.
Germany gains immensely from the market openness that supports its export-oriented manufacturers. The current French industrial policy acts as a direct provocation to the arrangement.
The Preposition Problem
The debate between Made in and Made with is a question of how tightly Europe should close its gates to the outside world. Paris believes that Chinese competition is currently destroying European industrial capacity.
Macron warned that if the automotive sector keeps buying Chinese steel then the survival of the producers will be measured in only a few years. Berlin sees the idea of a fortress Europe as a self-defeating strategy.
To the German government foreign investment is a central source of capital and technology. They believe that mandatory local content requirements would only lead to damaging trade disputes with global partners.
Executive Vice-President Stéphane Séjourné asked why Europe shouldn’t have its own preferences as China has Made in China and America has Buy American. The question is a direct provocation to the people insisting Europe remain uniquely exposed to global competition.
Germany responds that Europe is a unique project that cannot be compared to states the size of continents. The single market is built on a principle of openness among member states. For Berlin broadening the openness to the rest of the world is a fundamental necessity.
The Future Outlook
Commission President Ursula von der Leyen made it plain that she is ready to think about moving ahead with smaller groups of states if progress stays stalled. The threat may eventually force a compromise or it might essentially speed up the fragmentation of the bloc.
Economic competition with Washington and Beijing will necessitate a unified European response. Whether the response will favour a more protective stance is the question that currently divides Paris and Berlin.
The semantic distinction between in and with hides an intense disagreement about the way modern economies grow. France operates on the belief that markets necessitate the steady hand of government.
Germany remains convinced that markets necessitate the freedom to compete. The two philosophies are not easily brought together. The preposition separating the positions may ultimately prove to be broader than the Rhine.
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