Three issues that are causing disagreement between Macron and Scholz and have not yet been resolved.

During a two-day retreat in Hamburg, German Chancellor Olaf Scholz and French President Emmanuel Macron, who have a strained relationship, attempted to display a sense of cohesion.

The boat tour of the Hamburg harbor, lasting an hour and a half, was not ideal due to rain. While dining on traditional north German Fischbrötchen (pickled herring sandwiches), Macron appeared to be struggling to enjoy the meal.

At the conclusion, the two heads of state, accompanied by their respective administrations, gathered in Hamburg with the goal of establishing mutual stances on a variety of matters, such as military and trade relations with China. However, they did not report any tangible advancements. The only exception was a joint document addressing the simplification of bureaucratic processes in the EU (a useful fallback when other agreements cannot be reached).

Even though the discussions were dominated by the conflict in the Middle East, Scholz mentioned that both nations are dealing with comparable difficulties in areas such as economic development, immigration, and addressing the increase of extremist ideologies.

Macron issued a cautionary statement, stating that if France and Germany cannot cooperate, Europe will come to a halt.

Considering the significant disagreements, it would be prudent to prepare for further impasse.

Here are three main points of disagreement.

Energy subsidies

One of the main issues currently facing the EU is the task of reducing expensive energy costs while also shifting towards eco-friendly sources. However, disagreements between its two key members are impeding progress in this area.

French authorities contend that nuclear power is environmentally friendly due to its lack of carbon emissions. As a result, it is believed that nuclear energy should receive financial benefits in the proposed restructuring of the EU’s electricity market.

The city of Berlin is in disagreement. Officials from Germany are concerned that providing subsidies for French nuclear power could decrease the appeal of investing in renewable energies, such as wind and solar, which are crucial for Germany’s transition to a greener economy. There are also worries that this could give France an advantage by lowering their energy prices, which are already lower than those in Germany, potentially putting German companies at a disadvantage and leading them to move their production to France.

The disagreement is reaching a critical point with the expiration of an EU exception in 2025. This exception currently permits Paris to supply discounted nuclear energy to French businesses and individuals at a predetermined rate set by the government.

The French government is making every effort to guarantee its ability to determine the prices of nuclear power within the EU’s proposed reform of electricity markets. This will be achieved through the implementation of state-supported investment initiatives.

On Tuesday, Macron stated that there is ongoing effort from both parties to reach a deal by the end of the month, before the upcoming EU summit in Brussels on October 26-27. The president warned against getting caught up in immediate differences and risking a significant error of choosing between renewable energy or nuclear power.

Scholz also aimed to convey positivity: “Our thorough discussions have demonstrated our mutual desire to move forward and our determination to do so.”

Defense

Paris and Berlin have conflicting views on various defense matters, particularly regarding the involvement of the United States in ensuring Europe’s security. Differences over Europe’s procurement of American weapons were brought to light in a recent joint interview with French Armed Forces Minister Sebastien Lecornu and his German counterpart Boris Pistorius.

French leader Emmanuel Macron has publicly opposed a plan led by Germany to purchase air defense systems from Israel and the United States for a project called the European Sky Shield Initiative.

France has attempted to persuade other European cities to enter into agreements with European businesses, under the guise of “strategic autonomy,” which refers to the bloc’s ability to operate independently from external influences.

The Main Ground Combat System, a joint effort by France and Germany to create a battle tank, has caused tensions to escalate. Despite promises from Lecornu and Pistorius to expedite the project, conflicts between French and German defense companies have hindered progress.

A recent article from Frankfurter Allgemeine Zeitung, a German newspaper, has only added fuel to the fire of existing rivalries and has sparked some anger in Paris. The report stated, “Both the German industry and armed forces are skeptical about the notion of collaborating with a manufacturer like Peugeot to develop a premium product, considering they are the producer and user of the Mercedes S-class among tanks.”

Chinese electric cars

The recent action taken by the European Commission to initiate an anti-subsidy inquiry on Chinese electric cars has caused further disagreement.

Macron advocated for an inquiry of this nature, stating that the EU must safeguard itself from what he perceives as unjust competition. Scholz, on the other hand, has shown doubt, stating that he favors “worldwide competition” rather than a “protectionist approach.”

The primary worry for Berlin is that the investigation may lead to a trade conflict with Beijing, which would be detrimental to German car manufacturers as they heavily depend on the Chinese market.

Last month, during a panel discussion, German Economy Minister Robert Habeck expressed that the German car industry is understandably concerned about potential retaliation from China. He also noted that France has less at stake in a trade war as they sell significantly fewer cars in China. As a result, he stated that reaching a consensus on this issue is incredibly difficult.

According to Habeck, there is no real consensus between Berlin and Paris, as he mentioned in a previous statement last month.

Reporting was provided by Laura Kayali in Paris and Victor Jack in Brussels.