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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is editorial director and a columnist at Le Monde
The chickens have come home to roost — there is a huge hole in France’s budget. This may not come as a surprise to European observers of successive French governments’ loose interpretation of fiscal discipline. But this hole is so big that even the French, already reeling from months of unprecedented political uncertainty, are shocked.
They are left wondering how a fiscal deficit forecast at 4.4 per cent of GDP for this year, which is bad enough, has suddenly ballooned into a staggering 6.1 per cent. Prime Minister Michel Barnier, who leads a minority government after snap elections in July failed to return a majority, now says his priority must be tackling the “colossal” public debt he has inherited. Barnier’s proposed budget for next year includes €60bn of spending cuts and tax increases. He has pleaded for leniency in Brussels and for France to be permitted, temporarily, to exceed the EU’s deficit ceiling of 3 per cent of GDP.
President Emmanuel Macron may have something to say about this spectacular failure of his economic strategy, as should Bruno Le Maire, his finance minister of seven years, now a professor at Lausanne University. Their generous “whatever it costs” policy successfully protected the French economy from the impact of Covid-19 and the war in Ukraine, but the binge spending, which actually started with the gilets jaunes crisis in 2019, went on too long. France is now paying higher interest on its five-year debt than Spain and Greece. Its credibility is on the line, at the worst possible moment for Europe.
In rosier times, Germany, the other big power in the EU, would have sought to rein in its French partner. Presiding over a flourishing economy, former German chancellor Angela Merkel did not mind playing headteacher during the sovereign debt crisis in the early 2010s. But today neither her successor, Olaf Scholz, nor his finance minister, Christian Lindner, is in a position to patronise their French counterparts, as much as they may feel the urge to. The German economy is in recession, Scholz’s governing coalition is seriously dysfunctional and the rise of extremist parties is upending the country’s political landscape.
France as the problem child and Germany possibly once more the “sick man of Europe”? This combination does not bode well for the continent. For all its ups and downs, the Franco-German tandem has always been the driver of European integration. The engine, though, has been spluttering for the past two years because of deep difference caused partly by a lack of interest in Berlin, and partly by an excess of ambition on the French side.
The Polish election a year ago brought a glimmer of hope to Paris and Berlin. With Donald Tusk, the German-speaking new prime minister and former president of the European Council, at the helm in Poland after eight years of illiberal nationalist rule, surely Macron and Scholz could revive the so-called Weimar Triangle with Warsaw? Tusk’s centre-right government itself was eager to renew ties with Berlin and Paris. In the new strategic environment created by the war in Ukraine, this looked like the perfect match. Some hoped that the Weimar Triangle could compensate for the shortcomings of the Franco-German tandem. Diplomats joked that Warsaw could even help Berlin and Paris with some couples therapy.
Sadly, things took a different turn. Tusk’s domestic travails took priority over the European call of duty. Faced with a still strong populist, anti-German opposition, and with his eyes on a crucial presidential election for his party next year, the Polish premier has insisted on demands, notably about the legacy of the second world war and security issues, that Scholz is not prepared to meet. As a result, the Polish-German relationship is now, in its own complex way, even worse than Germany’s with France.
With the Franco-German engine stalled, the Weimar Triangle failing to bear fruit and Italy governed by the nationalist right, who will pick up the European mantle? “The commission?” a senior German official suggested, half jokingly, when I put the question to him. The commission is certainly in safe German hands with Ursula von der Leyen firmly in command at the start of her second term, having evicted Thierry Breton, the brash former French commissioner. Two new commissioners from the Baltic, Kaja Kallas of Estonia and Andrius Kubilius of Lithuania, bring fresh blood to strengthen EU foreign and defence policy. But another election may seriously threaten this construction: if Donald Trump regains the US presidency in November, Berlin, Paris and Warsaw will be well advised to bury their differences and work together, along with Brussels.
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