Tuesday 14 October 2025 5:24 am
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BERLIN, GERMANY – JULY 23: German Chancellor Friedrich Merz and French President Emmanuel Macron talk to media prior to talks at Villa Borsig on July 23, 2025 in Berlin, Germany. The two leaders are meeting as Germany, France and the United Kingdom forge a stronger European alliance following U.S. President Donald Trump’s disruption of transatlantic ties. (Photo by Christian Mang/Getty Images)
Despite growing economic strains and political turbulence in both countries, a potential alignment between Germany’s centre-right Chancellor Friedrich Merz and a far-right French president could temporarily steady Europe’s core — but deep fiscal and ideological divides between Paris and Berlin still threaten the long-term stability of the European Union and its single currency, says David Marsh
A cornerstone of Europe over 70 years has been the depth of cooperation between France and Germany at the centre of the continent. The alliance within the European Community (from the 1990s, the Union) has often featured dissent and conflict – such as discord between Paris and Berlin about preparations for the Euro in 1999 as well as, more recently, by disagreement on nuclear energy, trade agreements with Latin America and joint activities to build fighter aircraft. In the last few days, a new spectre has loomed. France looks increasingly likely to vote for a politician of the extreme right as its next president – either in April 2027, if Emmanuel Macron lasts to the end of his second term or conceivably earlier if the latest French government crisis results in France’s president standing down and calling early elections.
Might this lead to a European catharsis? My view is that we are heading for stormy waters but not a complete shipwreck – at least, not for the time being. Friedrich Merz, Germany’s centre-right Christian Democrat chancellor since May 2025 – who has already had to forge links with two failed French Prime Ministers during his brief time in office – would almost certainly get on reasonably well with a far-right figure in the Elysee Palace.
Merz is a hard-headed politician. His rationale is built around trying to withstand the rise of the Alternative for Germany (AfD), the far right anti-Euro and anti-immigration grouping in Germany which has become the second biggest parliamentary party. He has inaugurated a much tougher policy on migrants, building on border control ideas suggested 10 years ago to previous Christian Democrat chancellor Angela Merkel, which she rejected on both legal and moral grounds. Merz’s policies on immigration , and his steely demeanour on law and order and discipline in state finances, have some appeal to voters on the right who feel disenfranchised by mainstream parties, including the Social Democratic Party with which Merz is in fragile, low-majority coalition. This could slow or even reverse the meteoric ascent of the AfD.
Germany’s stalling economy
Against a rocky German economic background – with growth stalling badly following six years of stagnation – Merz has won support for his steady approach to foreign policy. But the domestic picture remains disquieting. Large-scale fiscal expansion for defence and infrastructure agreed at the outset of his chancellorship is taking far too long to work through. According to statistics released on 8 October, German industrial production fell to 2005 levels in August as output in the pivotal car sector tumbled 18.5 per cent from July. The news came on the eve of a Berlin ‘automobile summit’ between Merz and car company chief executives on Thursday to find ways to revitalise the hard-pressed industry.
On the European front, Merz has healed some previous fractures with France in the symbolic area of nuclear energy, assembled a working relationship with Donald Trump in the White House, produced leadership over Germany’s backing for Ukraine over the war with Russia, and forged a much-needed link with the UK in economics, trade and defence. The appearance of a leading figure from Marine Le Pen’s far-right National Rally party – either Le Pen herself or (should she be impeded by her five-year ban from running for office, against which she is appealing) Jordan Bardella – might, if Merz is lucky, strengthen his credentials as a seasoned political operator who can do business with a range of awkward foreign leaders.
In view of the stigma of the rise of National Socialism in Germany in the 1930s and the ravages of the second world war, the barriers towards electing AfD leader Alice Weidel as the next German chancellor are much higher than those facing an RN leader en route to the Elysee Palace. The combination of a right-of-centre chancellor in Berlin and a far-right leader in Paris might even emerge as a relatively stabilising force. The key would be whether they can agree a constructive European economic policy that puts growth firmly back on to the agenda.
A central problem in Franco-German relations will however remain. The French budget deficit appears out of control at over five per cent of gross domestic product, well above the basic benchmark of three per cent – veering ever more away from European principles of balanced budgets. The yield on French government bonds, once considered the safest in the Euro area after German Bund issues, has risen this week to above Italian levels, showing the extent to which France has fallen out of favour with worldwide investors. France’s budgetary malaise confirms my view in my book on Europe that the country is adding to the continent’s myriad fault lines. The single most damning indicator of insidious Franco-German strains concerns divergences over public debt. The French have been profligate while Germany has practised fiscal orthodoxy. The two countries’ debt-to-GDP ratios were virtually identical in 2007, just before the global financial crisis, but France’s has nearly doubled since then while Germany’s (after rising in subsequent years and then falling back) has remained unchanged. According to the elder statesman of European finance, Niels Thygesen, the 90-year-old Danish economics professor, for eight years chairman of the European Fiscal Board monitoring European public sector finances, ‘France has replaced Italy as the major problem country within the euro area.’
Macron’s ploy of reasserting a grip on elections on state finances by dissolving parliament in June 2024 and calling early National Assembly backfired spectacularly. It resulted in a hung parliament , a run of three failed prime ministers and intensified political discord over bringing down the deficit. Edouard Philippe, a moderate conservative , mayor of Le Havre and Macron’s prime minister in 2017-20 , warned this week that new parliamentary elections would bring anther hung assembly and deepen the crisis – leading calls for Macron to step down early.
If the RN comes to power in Paris, its leaders – taking a cue from Georgia Meloni, head of the far-Right Brotherhood of Italy party, Italian prime minister since 2022 – would be unlikely to espouse overblown nationalistic policies outlined during years in opposition. Departure from the euro or even full exit from the EU would not be part of the RN’s initial agenda. Instead the French far-Right would try to capitalise on Germany’s need for European cohesion and press for further relaxation of debt rules, more joint European borrowing and even a bail-out from Germany. In view of his enormous domestic constraints, these are requests which Merz would have to reject. Europe’s single currency is the single most visible achievement of the European Union. But Franco-German squalls could, over time, build up into a potential existential threat for the EU’s flagship project.
David Marsh is co-founder and Chairman of OMFIF. His book Can Europe Survive? The Story of a Continent in a Fractured World will be published by Yale on 14 October.
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