Europe
Franco-German rift threatens to derail EU competitiveness summit
Serious disputes between Germany and France are overshadowing today’s (February 12) special European Union summit on competitiveness.
The objective of this informal gathering is to draft new measures to bolster the EU economy. Experts argue that the internal market requires urgent reform; currently, trade barriers between EU member states are equivalent to a 45% tariff on goods and a staggering 110% tariff on services.
According to German Foreign Policy, while some proposals have met little resistance, others remain deeply divisive. Chief among these are demands for preferential treatment for EU-made goods in public procurement and the issuance of joint EU debt to finance critical investments in high-tech sectors.
France supports both initiatives, while Germany rejects them outright.
Conversely, a consensus appears to be emerging on strengthening private pension systems to utilize deposits for investment, modeled after the Canadian pension fund system. While this move would expose pensions to new market risks, a joint Franco-German concept paper explicitly endorses the project.
Objective: The Capital Markets Union
The agenda for today’s special summit at Alden Biesen Castle in Belgium includes initiatives regarding a potential Capital Markets Union (CMU). One primary goal is to create a unified EU capital market capable of generating larger investments than are currently possible within individual member states.
This integration is expected to help the EU compete with the US in sectors such as startup financing. Last year, German and French finance ministers Lars Klingbeil and Roland Lescure commissioned a report on the matter, which was presented in mid-January.
The report’s authors—former German Finance Minister Jörg Kukies and former Governor of the Bank of France Christian Noyer—propose encouraging larger financial groups across the EU to engage in joint investments while leveraging private pension services.
According to the report, if private pension services are significantly bolstered, pension funds could be utilized to inject substantial capital into private companies. This would, inevitably, turn pensions into objects of speculation. Klingbeil has already begun efforts to strengthen these private pension frameworks.
Diverging paths toward a “sovereign and competitive” Europe
Klingbeil is currently drafting a ten-point plan to strengthen the capital markets union. “In light of global upheavals, we are focusing on a sovereign and competitive Europe,” the SPD politician stated, adding that “strong capital markets” are the key to achieving this.
Among the ten points proposed by the Federal Finance Minister is the EU-wide standardization of the legal structures for small and medium-sized enterprises. Until now, only the European Company (SE) designation existed. Additionally, the plan seeks to standardize insolvency laws and streamline bureaucracy, though specific details remain vague.
Klingbeil’s plan also includes initiatives to strengthen private pension services, aiming for the comprehensive use of pension funds for investment and the inclusion of associated risks. To implement this, Klingbeil intends to rely initially on the “E6 format”—comprising Germany, France, Italy, Poland, Spain, and the Netherlands—rather than the entire EU. According to the minister, this would represent a further step toward a “multi-speed Europe.”
Plans to abolish unanimity for a “multi-speed” Europe
European Commission President Ursula von der Leyen has also signaled clear support for a “multi-speed Europe.” In a letter sent to EU heads of state and government on Monday ahead of today’s summit, von der Leyen noted that while the primary goal should always be to “reach an agreement among all 27 member states,” no one should “hesitate to use the possibilities for enhanced cooperation provided for in the Treaties.”
Under the EU’s founding documents, closer cooperation in specific policy areas is permitted provided at least nine member states join forces. To date, this mechanism has rarely been utilized.
One model discussed in the past is “Core Europe,” a Germany-centered alliance that would allow the EU’s power center to pursue deeper integration than the states on the union’s geographic periphery. Recently, Wolfgang Ischinger, President of the Munich Security Conference, proposed such a “core Europe” for the EU’s foreign and potentially military policy.
Merz vs. Macron
The option for “different speeds” within the EU is a critical factor for the summit, as German and French proposals to increase competitiveness have once again diverged sharply.
Chancellor Friedrich Merz, who initiated the special summit, advocates primarily for strengthening the internal market, reducing bureaucracy, and pursuing deregulation. The specifics of the latter two points remain entirely undefined; however, there are indications that the EU must stop supporting “zombie enterprises” that are no longer fit for the modern age. Such a move could impact everything from labor protections to environmental standards.
Merz also supports the simplification of digital legislation, though it remains unclear whether this would affect data protection standards.
From the perspective of French President Emmanuel Macron, these measures are insufficient. Macron warns that the world is experiencing a “deep geopolitical rift” hitting the EU from two sides: rapidly accelerating competition from China and continuous pressure from the Trump administration in the US. In an interview published in four leading European daily newspapers, Macron warned: “If we do nothing, Europe will perish within five years.”
French demands: “Made in Europe” and eurobonds
Consequently, Macron advocates not only for deregulation and the diversification of foreign trade relations but also for “prioritizing European products.”
This concept is being discussed under the “Made in Europe” banner. It would require a minimum proportion of jointly produced goods in EU public procurement across at least three sectors: steel, eco-technology, and electric vehicles. For electric cars, the proposed quota is 70%, while for solar panels—where Chinese competition is most intense—it ranges between 10% and 20%. This demand is being championed most vocally by French EU Industry Commissioner Stéphane Séjourné.
Furthermore, Macron is pushing for “joint debt capacity,” or Eurobonds, to fund investment in key sectors. The French leader argues that the EU is under-investing in defense, security, technology, ecological transition, artificial intelligence, and quantum technology. In his view, the EU has no choice but to engage in joint borrowing to close the investment gap with the US and China.
Germany emphasizes national interest
The German government rejects these final two demands, citing national interests.
Berlin fears that introducing a minimum “Made in Europe” quota for procurement would trigger retaliation. EU exporters could find themselves at a disadvantage in procurement processes outside of Europe. As the EU’s largest exporter, Germany would be the most affected by any such restrictions.
Furthermore, Germany remains staunchly opposed to EU joint debt, symbolized by Eurobonds. Berlin’s rejection is not merely a matter of principle; Germany’s debt is only half that of France, allowing it to easily assume its own debt to stimulate investment. Moreover, Berlin calculates that such investments would primarily benefit German companies rather than EU firms in general.
Italy sides with Germany
Rome has aligned itself with Berlin, stating that now is not the time to discuss the European joint debt proposed by Macron.
Italian Foreign Minister Antonio Tajani stated on Wednesday that while the government generally recognizes the need for joint borrowing to invest in strategic sectors, there is no point in entertaining the idea while France and Germany remain in conflict over it.
“Instead of starting a debate on issues where no agreement can be reached, I prefer to find solutions on matters where various countries already agree,” Tajani told Sky TV. “If an agreement cannot be reached, there is no point in entering a discussion, even on issues we find positive.”
Italy continued to support EU joint debt even under the current Prime Minister, Giorgia Meloni. However, in recent weeks, Meloni has drifted away from Macron’s “Made in Europe” proposals—which favored European companies in procurement and local content rules—and has moved closer to Merz.
Rome makes no secret of the fact that its cautious stance on discussing joint debt at the EU leaders’ meeting is a strategy to avoid tension with Germany. “I have always supported Eurobonds, but currently there is no agreement between Germany and France,” Tajani said. “Starting a discussion and dividing ourselves is pointless. We must find what unites us and move forward.”
Europe
German officials urge fighter jet alliance with Sweden and Spain
German Defence Ministry officials have advised Berlin to form a new fighter jet partnership with Sweden and Spain rather than join an existing UK-led consortium.
Internal ministry assessment notes obtained by Politico state that a trilateral arrangement among Germany, Sweden, and Spain represents a “more advantageous and promising” approach than joining the Global Combat Air Programme (GCAP) run by the UK, Italy, and Japan.
The proposal outlined in the document does not yet represent a final government decision, nor does it contain any indication that German Defence Minister Boris Pistorius has approved the recommendation.
The advice was drafted after Germany’s flagship project with France to build a next-generation fighter jet collapsed in June following years of industrial infighting.
Initiated in 2017 and later joined by Spain, the Future Combat Air System (FCAS) was conceived as a showcase initiative for European defence cooperation. The partnership aimed to develop an aircraft to replace Germany’s Eurofighter fleet starting in 2040.
However, the initiative foundered on disputes over operational control and workshare between France-based Dassault and Germany-based Airbus Defence and Space. Following unsuccessful rescue attempts at the political level, Berlin withdrew from the joint fighter project this year.
UK Prime Minister Andy Burnham raised the prospect of Germany joining GCAP during an 8 October meeting in Berlin with Friedrich Merz. The two leaders agreed that officials should continue discussions.
For Berlin, the choice carries implications that reach far beyond which model its air force will fly. The decision will determine who controls future military technology, which countries secure production contracts, and whether a new European partnership can avoid the frictions that dismantled FCAS.
Ministry assessment keeps distance from UK-partnered GCAP project
The ministry assessment listed several reservations regarding the GCAP project. The report argued that the existing programme focuses on operations beyond Germany’s capability requirements, whereas Berlin needs an aircraft better suited for missions over continental Europe.
The document also noted that German manufacturers would struggle to secure a significant share of development and production work within an already established partnership.
Invoking past experiences with the Eurofighter programme, which was developed in the 1990s and entered service in the early 2000s, the document took direct aim at British defence contractor BAE Systems.
The German Defence Ministry assessment accused BAE Systems of prioritizing exports over the development interests of Germany and Italy, warning that British dominance would prove incompatible with an equal partnership.
By contrast, the document stated that the military requirements of Germany, Sweden, and Spain align closely and that their starting positions are well balanced.
The assessment proposed an industrial partnership between aerospace giant Airbus and Sweden’s Saab, while recommending that the Saab-manufactured Gripen E fighter jet serve as a technological stepping stone until the new aircraft is developed.
The German Defence Ministry declined to comment on the matter. A separate ministry note, however, recorded British efforts to integrate Germany into GCAP as an observer or participant, asking German officials to examine potential industrial roles and military requirements.
An Airbus spokesperson said the company was “generally open to cooperation”, provided that German and Spanish industry secured a “substantial and equal role” across development, production, and operational phases.
“Purely political decisions without an industrial foundation remain insufficient,” the spokesperson said, urging authorities in Berlin and Madrid to clarify the path forward swiftly.
In an interview published in Handelsblatt on Monday, Airbus defence chief Michael Schollhorn pointed to ties with Saab, noting that the two companies have always worked well together.
A Saab spokesperson also indicated that the company is receptive to broad defence cooperation, including in fighter aircraft.
Emphasizing that large-scale collaborative projects are handled at the political level and that participation decisions rest with the respective governments, the spokesperson said: “All questions regarding potential Swedish participation should be directed to the Swedish government. Saab stands ready, as always, to support Sweden’s future fighter aircraft requirements.”
Europe
EU reopens debate on naming envoy for Ukraine talks with Putin
The European Union has returned to the idea of appointing an envoy to hold talks on Ukraine with Russian President Vladimir Putin.
According to sources familiar with the matter who spoke to Politico, this search gained fresh momentum following a visit to Russia by Steve Witkoff, the US special envoy.
During his trip, Witkoff proposed to Putin that Russia, the US, and Ukraine hold trilateral talks.
European countries, meanwhile, fear that Washington could accept terms unfavourable to Kyiv in negotiations that exclude them.
Sources speaking to Politico said the names being discussed for the envoy role include European Commission President Ursula von der Leyen, European Council President António Costa, and EU High Representative for Foreign Affairs and Security Policy Kaja Kallas.
Some European diplomats believe Finnish President Alexander Stubb may be the most suitable candidate for the post.
Stubb’s good relations with Trump and Finland’s experience in dealing with Russia are cited among the factors setting him apart.
An unnamed EU diplomat described Stubb as the only European politician so far to have demonstrated senior-level leadership.
Another group of diplomats argues that Costa should lead the talks. European leaders asked Costa during last week’s EU summit in Brussels whether the time had come to speak with Putin.
Politico’s source recounted that exchange: “Costa said no, saying he would not speak to Putin right now. But if we want to play a role in the negotiations, Costa still needs to initiate dialogue with Putin.”
According to an assessment by another source, the European Council president could serve as a more neutral mediator than von der Leyen or Kallas, who are seen as overly focused on supporting Ukraine.
“Three or four people cannot go there with each of us speaking on behalf of the European Union,” one of the sources told the publication. “Ultimately, the choice of who represents the EU must be based on maximum efficiency, not on a personal power struggle or someone’s narcissistic ambitions.”
Politico previously reported in January that the EU was considering appointing a special representative for Ukraine negotiations. At the time, the initiative drew support from several European leaders, including French President Emmanuel Macron and Italian Prime Minister Giorgia Meloni.
Putin said he was ready to negotiate with European countries, but asserted that Europe had “no peace agenda” and stood “on the side of war”.
The Russian leader also named former German chancellor Gerhard Schröder as Moscow’s preferred negotiator from Europe.
Kallas ruled out such an appointment, noting that Schröder was “a lobbyist for Russian state companies” and would sit “on both sides of the negotiating table”.
Stubb details obstacles to talks and Oslo diplomatic drive
Finnish President Alexander Stubb said the principal obstacle to ending the war between Russia and Ukraine was the territorial issue.
Stubb took part in talks in Oslo with US envoy Steve Witkoff, who subsequently travelled to Saint Petersburg to meet Vladimir Putin.
As reported by the newspaper Helsingin Sanomat, Stubb stated that advancing the peace process required either bilateral talks between Russia and Ukraine or trilateral negotiations involving the US.
The Finnish president listed the other major items to be addressed within a settlement as US security guarantees for Ukraine and the construction of a new European security architecture after the war ends.
Without stating it outright, Stubb implied that the core issue within this framework was Ukraine’s NATO membership. The Finnish leader pointed to monitoring the ceasefire, establishing the line of contact, ensuring energy and food security, and exchanging prisoners as practical tasks.
Stubb also detailed the talks held in Oslo on 20 October, which included Witkoff, Ukrainian President Volodymyr Zelenskyy, and Norwegian Prime Minister Jonas Gahr Støre.
The discussions, which spanned approximately eight hours across various formats, had three objectives: to lower tensions in public discourse, to convey European and Ukrainian proposals to the US envoy before his visit to Russia, and to determine the next steps toward a peaceful settlement. Stubb announced that these goals had been achieved.
Moscow ready to resume trilateral talks in November
Witkoff met Putin in Saint Petersburg on Wednesday.
Following the meeting, Russian presidential aide Yuriy Ushakov announced that Moscow was prepared to resume trilateral negotiations with the US and Ukraine during the first half of November.
Ushakov also said that the EU and NATO had begun to “take a more serious approach” to Kremlin proposals on Ukraine, adding that “matters” were moving toward an end to the conflict.
Witkoff described the meeting as “constructive”.
Sources told Bloomberg in September that Putin continued to insist the Donetsk region must come fully under Russian control, expressing confidence that the territory would be captured within the next six months.
Putin previously set conditions for ending the war, demanding that Ukraine abandon plans to join NATO, maintain a neutral and non-nuclear status, and that anti-Russian sanctions be lifted.
Europe
Trump midterms calculus halts Israeli strike plan against Iran
A comprehensive military operation planned by the Israeli military for 10 October did not take place because US President Donald Trump chose to avoid a broad conflict before the 3 November congressional midterm elections.
Preparations had been made on the orders of Prime Minister Benjamin Netanyahu for an aerial bombardment meant to last several days, according to a report by the Financial Times citing sources familiar with the matter.
The list of targets included nuclear facilities and locations associated with the Iranian leadership, along with power stations and other civilian infrastructure sites.
The planned strikes were projected to exceed the joint operation launched by the US and Israel in February in terms of intensity.
White House Deputy Press Secretary Anna Kelly told the newspaper: “The United States is not going to strike Iran at any point before the midterms.”
Kelly argued that the administration in Tehran was in distress both economically and militarily, adding that the blockade imposed on Iranian ports and US efforts to secure oil shipments through the Strait of Hormuz were producing results.
Speaking to the newspaper, one source addressed the possibility of strikes resuming in the coming weeks, saying: “There’s either going to be a deal or a strike.”
The same source reported that Washington aims for a comprehensive settlement that resolves the conflict over both the Strait of Hormuz and the nuclear programme, although it remained unclear whether the US would have participated directly in the cancelled operation.
Another source said the preparations for the operation might have served as leverage to pressure Tehran in negotiations, adding that the final decision on any new military step rests with the US president.
Hegseth reviews updated target list in Israel
An Israeli official said US Secretary of War Pete Hegseth visited Israel on 19 October to meet with Netanyahu and senior representatives.
Another source stated that the Israeli side presented an updated target list to its American counterparts, compiled with fresh intelligence and incorporating civilian infrastructure sites that had not been struck earlier this year.
The Pentagon did not respond to questions regarding the meetings, while Netanyahu’s office and the Israeli military declined to comment.
Despite the postponement of the operation, Trump and Netanyahu continued to issue military warnings to Iran in public.
In a video released on 19 October, Netanyahu addressed Trump, saying: “Donald, you said we need to finish this, and we will finish it together.” Speaking on speakerphone, Trump responded: “You’re a great warrior, and we’re going to prove it very soon.”
These engagements between the leaders coincide with critical election cycles in both countries.
Parliamentary elections in Israel are scheduled for 27 October, one week before the vote in the US.
Most public opinion polls in the country show the opposition bloc holding a narrow lead over Netanyahu’s coalition, though neither side commands a clear majority.
Axios, a US-based news outlet, previously reported that the Pentagon instructed military planners to finalize strike plans against Iran, though the directive specified no date and Trump had not reached a final decision.
On 15 October, CNN reported on plans to use the GBU-43/B munition, known as the “mother of all bombs”, against Iranian nuclear facilities, with US officials who spoke to the broadcaster expressing scepticism about the weapon’s ability to destroy deep bunkers.
While Tehran announced that it remains open to a diplomatic solution, it declared that any potential operation would draw a fierce response.
Iranian Foreign Minister Abbas Araghchi stressed that if its adversaries chose military conflict, the response would be “much harsher than before”.
Following the joint operation launched by the US and Israel on 28 February, Iran retaliated by striking targets across the region and restricting maritime passage through the Strait of Hormuz.
Although the parties reached an agreement in June covering a ceasefire and negotiations to lift the blockade in the strait, reciprocal strikes between the US and Iran have not ceased.
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