Germany and France: The Shaking Pillars of the European Union
Germany and France: The Shaking Pillars of the European Union
Germany and France, two of the most influential powers in the European Union (EU), are currently facing immense pressure from economic challenges and political uncertainty. Rising public debt, a slowdown in key industries, and increasing competition from China over the past several years have put both countries in a precarious position.
The situation is not merely an internal issue for these two nations. It is sending shockwaves throughout the EU, threatening the stability of the entire bloc. If Germany and France fail to recover in time, the risk of a new economic crisis in Europe will escalate and could even spiral into a global issue.
When the once-strong pillars of the EU begin to shake, the key question arises: Can the EU remain resilient in a world filled with uncertainty and intensifying competition?
Germany and France: The Shaking Economic Pillars of the European Union
Ford employees at their plant in Cologne on 10 December, prior to the visit of the German chancellor. Photograph: Sascha Schuermann/AFP/Getty Images
Germany and France have played a crucial role in driving the EU’s economic stability. Their influence was particularly evident during the Greek debt crisis from 2009 to 2015, when both countries took the lead in creating financial aid programs to prevent the crisis from spreading to other eurozone members, which could have severely impacted the region.
During that period, Germany served as the largest financial contributor, imposing strict austerity measures in exchange for financial assistance to Greece. Meanwhile, France supported those measures to protect the EU’s stability and maintain the strength of the euro currency.
However, the situation today has shifted dramatically. Germany and France are now facing rising public debt and slowing economic growth, raising concerns about their ability to recover.
What were once the EU’s strongest pillars are now at risk of becoming economic burdens. If these issues are not resolved quickly, a new economic crisis could emerge—this time originating from the very countries that once led the charge in solving previous crises.
Germany and France, which once ensured financial stability for the EU, are now under pressure from industrial competition, domestic political instability, and external issues such as the Russia-Ukraine war, which has caused energy costs to soar.
Debt Risks and the Threat of Default
France’s public debt has risen to a concerning 112% of GDP in 2025, well above the eurozone average of 93%. Meanwhile, Germany, once considered a model of fiscal discipline, is facing a recession, with its GDP contracting by 0.3% for three consecutive quarters.
This raises concerns about both countries’ ability to repay their public debt. If they fail to control rising debt levels in time, the risk of default could become a reality, which would destabilize the EU and disrupt global financial markets.
Germany and France, as the two largest economies in Europe, have traditionally played key roles in maintaining the EU’s financial stability. However, their internal debt crises may now erode their leadership roles, potentially triggering a new public debt crisis in Europe.
If Germany and France fail to manage their debt, the global ripple effects will include market volatility, lower investor confidence, and rising borrowing costs for other countries worldwide.
What were once the financial pillars of Europe may soon become the catalysts for a financial crisis no one expected.
Key Industries Facing a Significant Slowdown: Warning Signs for the German and French Economies
Germany’s powerful union led workers in walk-outs after Volkswagen’s cost-cutting plans threaten thousands of jobs and plant closures. JENS SCHLUETER/AFP via Getty Images
One of the major factors contributing to Germany and France’s economic slowdown is the decline of their key industries, which once drove economic growth.
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Germany’s Automotive Industry in Crisis
The automotive sector, which accounts for approximately 20% of Germany’s GDP, is facing fierce competition from Chinese electric vehicle (EV) manufacturers.
Chinese automakers are producing more affordable and technologically advanced EVs, eroding Germany’s global dominance in the automotive sector.
In response to this competitive pressure, Volkswagen, one of Germany’s largest automakers, has announced factory closures and plans to cut over 10,000 jobs by 2025 to adapt to changing market dynamics.
The automotive slowdown is not only affecting major companies but also supply chains, impacting steel manufacturers and auto parts producers, many of whom have already closed plants.
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Energy Crisis and Slowing Production
Another key factor contributing to the economic difficulties in Germany and France is the soaring energy costs caused by the Russia-Ukraine war.
Both countries relied heavily on Russian natural gas imports, but after the EU imposed sanctions on Russia, they had to seek alternative energy sources, which are 30% more expensive than before.
These rising energy costs have reduced the competitiveness of European manufacturers, forcing many factories to slow production or shut down operations.
The manufacturing sector, once a pillar of both economies, is now suffering under the weight of high energy costs and rising competition, causing both countries’ economic growth to stall.
Political Instability Adding to Economic Woes
A participant waves a French national tricolor during an election night rally following the projected results of the second round of France's legislative election, at Place de la Republique Photo by EMMANUEL DUNAND/AFP via Getty Images
In addition to economic struggles, both Germany and France are dealing with political instability, which is undermining investor confidence and delaying essential reforms.
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France: Pension Reform Protests
France is facing nationwide protests against President Emmanuel Macron’s pension reform, which raised the retirement age from 62 to 64.
These protests have paralyzed the country, especially in major cities like Paris, Marseille, and Lyon, further disrupting economic activity and increasing political tensions.
Businesses have been forced to temporarily shut down, and transportation networks have been severely impacted, further reducing France’s attractiveness as an investment destination.
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Germany: Slow Response to Energy and Competition Challenges
In Germany, Chancellor Olaf Scholz has faced criticism for his slow response to the energy crisis and rising competition from China.
German industrial leaders are pressuring the government to take swift action to protect the country’s economic interests, but policy changes have been slow, causing investor confidence to wane.
The Russia-Ukraine War: A Catalyst for Europe’s Economic Crisis
Source : AP photo/ Efrem Lukatsky
The Russia-Ukraine conflict has become a major factor exacerbating the economic challenges faced by Germany and France, particularly in terms of energy security, which is one of the key costs affecting the industrial sector in both countries.
Both economic powerhouses heavily relied on natural gas imports from Russia to support domestic production and business operations. However, after the European Union imposed sanctions on Russia, they were forced to seek alternative energy sources that are significantly more expensive.
Soaring Energy Prices Putting Pressure on Production
The continuous rise in energy prices has caused manufacturing costs in Europe to skyrocket by over 30% compared to the previous year. This has led producers in Germany and France to face declining profits and a loss of competitiveness in the global market.
In comparison, manufacturers in the United States and China enjoy lower energy costs, allowing them to offer products at lower prices. This has made European goods less attractive to global consumers and weakened Europe’s position in international trade.
Impact on the EU and Global Economy: When Germany and France Falter
If Germany and France fail to address their economic and political issues, the repercussions will extend beyond Europe, impacting the global economy in several ways.
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Euro Stability at Risk
The euro, the shared currency of the European Union (EU), could face significant volatility if the two largest economies in the region encounter debt repayment issues or default risks.
If this situation occurs, a weaker euro would disrupt global financial markets, as the currency is one of the world's primary reserve currencies. The depreciation of the euro would increase market volatility and reduce investor confidence in European assets.
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Decline in Investor Confidence
Global investors may lose confidence in the EU as a stable investment destination if Germany and France continue to face economic stagnation and unresolved political issues.
This loss of confidence could result in capital outflows from Europe, reducing foreign direct investment (FDI) across the region. A drop in FDI would further hamper the EU's economic recovery, making it harder for Europe to bounce back from the crisis.
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Global Economic Slowdown
Both Germany and France are key trading partners for many countries worldwide. If the two countries face a prolonged economic slowdown, the impact will extend to the global economy, particularly in sectors like:
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- Automotive
- Energy
- Industrial Manufacturing
A slowdown in Germany and France would result in lower global demand, affecting international trade and potentially pushing some regions into economic recession.
Given the interconnected nature of the global economy, the struggles of these two economic giants could have far-reaching consequences across global markets.
Lessons from Greece: What the EU Must Learn to Prevent Another Crisis
image source: Telegraph.co.uk
The Greek debt crisis (2009-2015) serves as a critical lesson that the European Union (EU) must not overlook. Although Greece had a much smaller economy compared to Germany and France, its public debt crisis nearly brought the entire eurozone to collapse.
During that period, the EU was forced to implement large-scale financial aid programs to stabilize Greece and prevent the crisis from spreading to other member states.
However, the assistance came with strict conditions. The EU imposed austerity measures on Greece, which required the country to drastically cut public spending in exchange for financial aid.
These austerity measures led to widespread social unrest, mass protests, and a decade-long economic recession, leaving the country struggling to recover for many years.
Conclusion: Restoring the Pillars of the European Union
Germany and France are not just two of the largest economies in Europe, but also key pillars that uphold the stability of the European Union (EU). The challenges they are currently facing—rising public debt, slowing industries, political instability, and intensified competition—are becoming serious threats to the region’s stability.
To ensure long-term stability, both Germany and France must take decisive action to address their internal issues, restore investor confidence, and reclaim their position as economic pillars of the EU.
If they fail to solve these problems, the risk of a major economic crisis will grow significantly, and the consequences will likely spread beyond Europe, impacting the global economy.
The future of the EU depends on the recovery of its two strongest members. As Germany and France battle these challenges, the world is watching closely to see how they will recover and maintain their leadership roles in Europe.
🕘 6 Jan 2025 | 4:00 PM
Note: This article is intended for preliminary educational purposes only and is not intended to provide investment guidance. Investors should conduct further research before making investment decisions.
