France-Germany: Divided in Europe, USA united in…Iran

US President Donald Trump announcing that America will withdraw from the Iranian nuclear non-proliferation Agreement. 8 May 2018, White House official photo.

Last Tuesday afternoon the President of ‘America firstDonald Trump withdrew the US from the Nuclear non-Proliferation Agreement with Iran. The deal is known as P5+1 and was co-signed by the US, France, Britain, Germany, Russia and China. There is no information regarding when the US is to re-introduce its economic sanctions against Iran, and what kind of sanctions, but sources say they will surely touch energy and finance. The same sources say it will take at least three months to clarify that. After pulling out of the Paris Climate Accord and the Trans-Pacific Partnership in trade, this is a recurrence of Trump mania to uproot the major multilateral international agreement packs which his predecessor Barack Obama had signed.

However, this time the effects will be felt right away, in upsetting the balance of power and the flow of crude oil in the Middle East and the Eastern Mediterranean, the underbelly of Europe. In the past few days it has been clear that the US was about to abandon the P5+1 pact. During that time the three major European countries, France, Britain and Germany have unsuccessfully pressed Donald Trump not to withdraw from the Iranian deal. As it turns out, the US is taking this step alone.

Upsetting the Middle East

There is every indication that Russia and China are not going to endorse the American sanctions against Iran. As for the EU, already, Federica Mogherini, the European representative for external relations has clarified the club is not pulling out of the Iranian deal. She stated clearly and solemnly “As long as Iran continues to implement its nuclear related commitments, as it is doing so far, the European Union will remain committed to the continued full and effective implementation of the nuclear deal.” Mogherini also urged the US not to impede others from enforcing the deal. This is a very complicated issue though, touching the American activities of the European firms, which may embark on business with Iran and face legal repercussions in the US.

Iran itself has left it open whether it will abandon or continue enforcing her part of the Agreement, as far as her obligations are concerned, regarding the nuclear program. It depends on the internal developments in Tehran, where the Trump decision is thought to have emboldened the hard line elements of the Iranian political spectrum, like the Islamic Revolutionary Guards.

Divided in Europe

Coming back to Europe, the Iranian affair is the only policy issue uniting the major powers of the Old Continent. With Britain not knowing yet which exit to choose to abandon the club, the two continental countries, France and Germany, see nothing but differences between them. The French President Emmanuel Macron’s vision for a closer and more cooperative Eurozone and his option to vigorously confront the US trade attacks, have taken the Germans aback.

As a result, the split between Paris and Berlin takes new dimensions, after the German ruling party, the Christian Democrats decided in the most formal way to oppose the European reforms Macron has envisioned. Last Monday, Handelsblatt, the German financial newsgroup, which authentically expresses the country’s standpoint on economic matters reported that, “Senior politicians in the governing Christian Democrats plan to nix a proposal that foresees a European Union finance and economics minister and an EU-wide banking union”. It also confirmed that “Instead, the center-right party insists that Berlin’s parliament keep a veto on European decisions that relate to money”. In Germany it’s all about money.

Berlin blocks Paris

This is a definite answer to Macron’s plan for a closer and more resilient Eurozone, after it has become evident that the present arrangement with Germany hoarding trade surpluses and the others accumulating deficits, cannot last for long. According to the above mentioned source, last year “Germany exported €749.7 billion worth of goods across the EU in 2017, about 59% of its total exports.”

It’s crystal clear then that Germany finances her well-being at the expenses of her fellow EU members. Berlin’s reply that the German goods are more competitive doesn’t tell the full story. As mentioned above, reality tells us that the present arrangement cannot last for long. It will lead to political stalemates as in Italy, as long as Germany refuses to recycle her reserves, within and without the country in an EU context. This can be done through investments, more consumption and growth spending targeted to support – with German money – economic convergence between the North and the South. In this division, France is now firmly placed in the South.

The US waits for an answer

Differences between Germany and France are also becoming evident in confronting the American trade aggression, with the imposition of super import levies on steel and aluminum products. US President Donald Trump has made clear that his country will impose the new import tariffs as from 1st June, if the European Union doesn’t comply with his demands for possible self imposed export restrictions. His target is, obviously, the German engineering and automotive sector (Mercedes, Audi, BMW, WV). Why then does France, not so greatly affected by Trump’s aggression, react so strongly? Let’s dig into it.

The EU response to the American attack, has seriously divided the Brussels bureaucracy because of the completely different lines adopted by France and Germany. Paris is favoring an all out counterattack aimed at the non trade barriers the Americans are imposing on agro-food products. Berlin begs for moderation and bargaining about tariffs on cars and other engineering manufactures. The French though, according to a source, won’t settle for anything less than “a permanent and unconditional exemption for the EU from the steel and aluminum tariffs, adding: That’s the prerequisite for any other option.” In this way, France blocks a possible EU-US compromise about tariffs that Germany can tolerate.

Uncertain Germans

In view of that, the German Economy Minister Peter Altmaier said on Wednesday that “finding a common stance with France and formulating an offer to the United States were equally difficult”. Altmaier has also proposed the revitalization of a ‘light’ version of the dead Transatlantic Trade and Investment Partnership. TTIP was politically buried two years ago, after the public opinion appeared quite negative about the environmental aspects of the deal and the rights it purported to multinational firms. Again, France and many other EU member states opposed the revitalization of TTIP, leaving Germany alone.

This uncertain step of Altmaier is an indication of Berlin’s impasse and anguish in relation to foreign trade. Germany has most to lose from a trade war, and that’s why Berlin is desperately seeking a compromise with the Americans. Possibly in the same line of spasmodic Berlin moves, Chancellor Angela Merkel is rushing to meet the Russian President Vladimir Putin in Sochi on 18 May. She is the first western leader to meet the Russian ruler in Russia, after he was pompously sworn in for a fourth Presidential tenure and another six year reign.

All in all, there are big differences between France and Germany concerning key issues for the future of the European Union. Macron, however, has managed to upgrade the role of Paris bringing it to an equal footing with Berlin, in the functioning of the French-German axis. Surely, Germany cannot anymore set the EU course alone, as she has many times in the recent past. France is not any more the second violin, as François Hollande and Nicolas Sarkozy, the two previous occupants of the Champs-Élysées Palace, had allowed their country to be vis-à-vis the northern neighbor. It remains to be seen, if the Germanic era of the European Union is coming to an end.

 

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