Janice R. Andrews
Europe’s two largest economies, France and Germany, face political instability and financial challenges just as Donald Trump prepares to assume office as U.S. president. Often referred to as the “engines of EU growth,” these nations will lack stable governments to address mounting issues, including Trump’s policies, trade tariffs, and NATO funding disputes.
Political Instability in Europe’s Powerhouses
As Trump’s inauguration approaches on January 20, Germany and France are grappling with leadership vacuums. Chancellor Olaf Scholz’s coalition government in Germany has lost its parliamentary majority, triggering snap elections set for February 23. Current polls predict no party will secure an outright majority, likely delaying the formation of a functioning government until at least March.
In France, the situation is even more precarious. Constitutional constraints mean new elections cannot occur before July 2025. The French National Assembly remains fractured among three major blocs: the far-right National Rally (RN), the leftist New Popular Front (NFP), and President Emmanuel Macron’s centrist Ensemble pour la Republique (Ensemble). Political scientist Claire Demesmay from Sciences Po Paris describes France’s political environment as “highly unstable,” noting the lack of tradition for multi-party coalitions, which exacerbates governance challenges.
Fiscal Disputes and Economic Turmoil
Both nations are entering 2025 without approved budgets due to fiscal discord. Germany’s previous coalition dissolved over budget disagreements, while in France, former Prime Minister Michel Barnier’s failure to pass a budget led to his ousting. President Macron appointed centrist François Bayrou as prime minister, but his ability to govern effectively remains uncertain.
Carsten Brzeski, chief economist at ING Bank, highlights a critical divergence in fiscal policy between the two nations. While France grapples with a national debt crisis—the third highest in the eurozone—Germany’s stringent debt brake limits new borrowing. France’s 2024 budget deficit is projected at 6% of GDP, double the eurozone’s 3% limit. This has triggered EU deficit procedures and a Moody’s credit downgrade, increasing borrowing costs.
In contrast, Germany’s budget deficit remains below 3%, but critics argue its debt brake hampers essential infrastructure investments. Political gridlock ensures that reforms will have to wait until a new government is in place.
Economic Growth Stalls
Economic forecasts paint a bleak picture for both nations. France’s central bank expects growth of 1.1% in 2024, dipping to 0.9% in 2025, citing rising domestic and global uncertainties. Germany, mired in recession, anticipates minimal growth of 0.2% for 2025. The Bundesbank warns that escalating global trade protectionism, potentially fueled by Trump’s policies, poses significant risks.
Germany’s export-driven economy sees potential relief in new trade agreements. The EU-Mercosur treaty, signed in December, aims to establish the world’s largest free trade zone, covering 700 million people. However, France has already voiced opposition to the agreement, complicating ratification.
Claire Demesmay notes that trade disagreements between Germany and France often reflect deeper divisions. “In France, large trade deals are viewed with skepticism. There’s a perception that they erode national sovereignty, which fuels political tension,” she said.
Trump’s Impact on EU Unity
During Trump’s first presidency, European leaders often appeared unprepared for his abrupt policy changes. This time, analysts suggest the EU is better equipped to respond. However, disunity between France and Germany threatens coordinated action.
Carsten Brzeski emphasizes the importance of internal reforms and infrastructure investments. “Europe needs to focus on its own economic stability instead of merely reacting to Trump’s policies,” he said. Strong Franco-German cooperation is critical for driving EU progress, but the current political climate in both nations makes this challenging.
Conclusion
As Donald Trump’s presidency looms, France and Germany face unprecedented challenges. Political instability, fiscal disputes, and economic stagnation risk weakening Europe’s ability to navigate turbulent waters. For the EU’s “twin engines” to regain momentum, swift action and unity will be essential—a tall order given the current state of affairs.
