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Even before the French and German governments collapsed, Europe’s economy had enough difficulties. Tepid growth and lagging competitiveness versus the US and China. An auto industry that’s struggling. Where to find billions for defence against Russia? And now Donald Trump threatening tariffs.
Solutions will be harder to find while the two countries that make up almost half of the eurozone economy remain stuck in political paralysis well into 2025.
Where once there was the so-called French-German axis to push Europe ahead, now there’s a vacuum. French Prime Minister Michel Barnier resigned Thursday after losing a vote of confidence, and while President Emmanuel Macron will appoint a successor, the new head of government will lack a majority. Elections are not constitutionally permitted until at least June, as per an AP report.
Germany’s coalition led by Social Democratic Chancellor Olaf Scholz with the Greens and pro-business Free Democrats fractured in November, triggering an early election on February 23. Talks to form a new government could last into April.
At least Germany’s likely new chancellor, conservative opposition leader Friedrich Merz, appears open to loosening constitutional restrictions on borrowing to enable pro-growth spending and investment, said Mujtaba Rahman, managing director Europe at Eurasia Group.