BRUSSELS — EU ambassadors are close to a deal on a €90 billion loan to finance Ukraine’s defense against Russia thanks to a draft text that spells out the participation of third countries in arms deals, three diplomats said Wednesday. The ambassadors are scheduled to meet on Wednesday afternoon to finalize talks after a week of difficult negotiations. The final hurdle was deciding how non-EU countries would be able to take part in defense contracts financed by the loan. The draft deal, seen by POLITICO, would allow Ukraine to buy key weapons from such countries — including the U.S. and the U.K. — either when no equivalent product is available in the EU or when there is an urgent need. The list of weapons Kyiv will be able to buy outside the bloc includes air and missile defense systems, fighter aircraft ammunition and deep-strike capabilities. If the U.K. wants to take part in procurement deals beyond that, it will have to contribute financially to help cover interest payments on the loan. The text also mentions that the British contribution — to be agreed in upcoming negotiations with the European Commission — should be proportional with the potential gains of its defense firms taking part in the scheme.  France led the effort to ensure that EU countries — which are paying the interest on the loan — gain the most from defense contracts. In an effort to get Paris and its allies on board, the draft circulated late Tuesday includes new language which says that “any agreement with a third country must be based on a balance of rights and obligations,” and also that “a third country should not have the same rights nor enjoy the same benefits,” as participating member states. The draft also strengthens the control of EU countries over whether the conditions to buy weapons for Ukraine outside the bloc have been met, saying Kyiv will have to “provide the information reasonably available to it demonstrating that the conditions for the application of this derogation are met.” That will then be checked  “without undue delay” by the European Commission after consultation with a new Ukraine Defence Industrial Capacities Expert Group. The new body will include representatives from EU members countries, according to diplomats. The European Commission will raise €90 billion in debt to fund Ukraine’s war effort before Kyiv runs out of cash in April. After facing intense pressure from national capitals, the Commission agreed to deploy unused funds in its current seven-year budget to cover the borrowing costs. If that is not enough, member countries will have to pay the difference. Budget Commissioner Piotr Serafin will meet the European Parliament and the Cypriot presidency of the Council of the EU on Thursday in an attempt to solve disagreements on the repayment of the borrowing costs, said one official.

LONDON — The European Commission is looking into whether former British politician Peter Mandelson broke EU rules over his contact with sex offender Jeffrey Epstein. Even though the U.K. left the EU six years ago, Mandelson remains bound by obligations that he signed up to during his time as a commissioner, from 2004 to 2008. Newly released files suggest Mandelson in 2010, while he was a senior minister in the U.K. government, may have given Epstein advance notice of a €500 billion bailout to save the euro at the height of the spiraling Greek debt crisis. European finance ministers agreed the deal overnight amid fears that the failing Greek economy could trigger a wider crisis across the eurozone. According to the files released in the U.S., Epstein, who was a financier, sent Mandelson an email the previous night saying: “Sources tell me 500 b euro bailout , almost complete.” Mandelson replied: “Sd be announced tonight.” The cabinet minister then said he was just leaving 10 Downing Street and “will call.” The British government decided not to take part in the bailout for the euro but was part of the talks that paved the way for the emergency measure, so would have known how events were progressing. On Tuesday, Balazs Ujvari, a spokesperson for the Commission said: “We have rules in place emanating from the treaty and the code of conduct that commissioners, including former commissioners, have to follow.” When there is an indication that the rules may not have been followed, the Commission looks into any potential breaches, he said. “We will be assessing if, in light of these newly available documents, there might be breaches of the respective rules with regard to Peter Mandelson.” Mandelson did not immediately respond to a request for comment. He has previously said he was wrong to have continued his association with Epstein and apologized “unequivocally” to Epstein’s victims.

PARIS — The French state budget for 2026 officially passed through parliament on Monday, ending a months-long deadlock that had increased fears of a debt crisis in the European Union’s second-largest economy. After months of cross-party negotiations failed to yield consensus, center-right Prime Minister Sébastien Lecornu activated a constitutional clause that allows the government to pass legislation without a vote in parliament. The use of that clause, however, allows lawmakers to put forward motions of no confidence, which, if passed, lead to the bill’s defeat and force the government to resign. Lecornu’s minority government survived several no-confidence votes put forward by left-wing and far-right groups. His survival came down to a decision by the center-left Socialist Party not to join their former allies on the left in voting against Lecornu, in exchange for government concessions including €1 lunches for university students. Lecornu had initially aimed to pass a budget that would bring France’s 2026 deficit to 4.7 percent of gross domestic product, but policy requests granted to various political groups bumped that figure to about 5 percent of GDP, per the government’s most recent estimate. To avoid a U.S.-style shutdown after failing to finalize fiscal plans before the new year, last year’s budget was rolled over into January. The 2026 budget is expected to take effect shortly after receiving a green light from France’s Constitutional Court, which will proceed imminently with a routine legal review.

PARIS — Former French Economy and Finance Minister Bruno Le Maire was introduced to Jeffrey Epstein at the convicted sex offender’s house, according to the latest document release by U.S. Department of Justice. Le Maire was purportedly brought to one of Epstein’s homes by former President Nicolas Sarkozy’s aide Olivier Colom, according to an email exchange between Colom and Epstein. The email does not specify at which of Epstein’s houses they met. The email exchanges also do not specify when Le Maire, who spent seven years leading the Economy and Finance Ministry, allegedly met Epstein. The email exchange between Epstein and Colom is dated Nov. 24, 2018 — before Epstein was charged in 2019 but long after the favorable plea deal he cut in 2008 with federal prosecutors in Miami. Epstein died by suicide while in federal custody in 2019. Colom wrote in the series of emails that he regularly meets Le Maire and his then chief of staff, Emmanuel Moulin. Moulin is currently President Emmanuel Macron’s chief of staff. There is no suggestion in the email that Moulin met with Epstein. Le Maire and Moulin did not respond immediately to requests for comment. POLITICO could not immediately find contact information for Colom. Le Maire, a longtime fixture of French conservative politics and a former presidential candidate, now teaches at a university in Lausanne. While he was mulling a bid for the 2027 presidential election, his reputation has suffered significantly as France has struggled to cut trillions in debt since his departure. Le Maire’s appointment as armed forces minister last year was met with such outrage it helped trigger a government collapse after a mere 14 hours. Colom also asked Epstein in a 2013 email for “any ideas” helping to raise money for Le Maire as a “future candidate [sic] to the Presidential election.” Epstein responded: “lets meet and talk about it.” The documents include several exchanges between Colom and Epstein, including one in which Epstein says he is on his island in the Caribbean “with an aquarium full of girls.” Colom responded: “The King of Saudi Arabia has a few white sharks in his [sic] at his Jeddah palace. I totally prefer yours. Sure I would enjoy the view.” Marion Solletty contributed to this report.

Donald Trump’s political war chest grew dramatically in the second half of 2025, according to new campaign finance disclosures submitted late Saturday, giving him an unprecedented amount of money for a term-limited president to influence the midterms and beyond. Trump raised $26 million through his joint fundraising committee in the back half of last year, and another $8 million directly into his leadership PAC. And a super PAC linked to him has more than $300 million in the bank. All together, a web of campaign accounts, some of which he controls directly and others under the care of close allies, within the president’s orbit have $375 million in their coffers. The funds far outstrip those of any other political figure — Republican or Democrat — entering 2026, and have no real historical precedent. And Trump could put them to use this year for the midterms, or to shape future elections, even as he cannot run for president again. Trump continues to outpace any other Republican in raising money, both from large and small-dollar donors. His joint fundraising committee — Trump National Committee, which pools fundraising for a variety of Trump-aligned groups — accounted for 1 in 8 dollars raised on WinRed, the primary Republican online fundraising platform, during the second half of 2025, according to a POLITICO analysis. And no super PAC raised even half as much in 2025 as the $289 million from MAGA Inc., the Trump-aligned super PAC that both the president and Vice President J.D. Vance appeared at fundraisers for last year. Trump has given few clues as to how he might put the funds to use. Trump National Committee primarily sends funds to the president’s leadership PAC, Never Surrender, with a bit of money also going to the Republican National Committee and Vance’s leadership PAC, Working For Ohio. Candidates cannot use leadership PAC money for their own election efforts. But the accounts — which are common across Washington and have long been derided by anti-money in politics groups as “slush funds” — allow politicians to dole out money to allies or fund political travel. Never Surrender spent $6.7 million from July through December, with more than half of that total going toward advertising, digital consulting and direct mail — expenses typically linked to fundraising. So far, Trump’s groups have held their powder in Republican primaries. While Trump has endorsed against a handful of Republican incumbents now locked in competitive primaries — including Sen. Bill Cassidy of Louisiana and Rep. Thomas Massie of Kentucky — and threatened others, he hasn’t used money. A super PAC targeting Massie, MAGA KY, is run by Trump allies but has largely been funded by GOP megadonor Paul Singer. MAGA Inc.’s only election-related spending last year was to boost now-Rep. Matt Van Epps in the special election in Tennessee’s 7th District. Trump’s massive war chest makes him a political force, independent of the traditional party infrastructure. The RNC — which derives a significant portion of its fundraising from Trump — had $95 million in the bank at the end of the year, roughly a quarter of what the Trump-linked groups have. And their rivals at the Democratic National Committee are far worse off — at just over $14 million, while owing more than $17 million in debt.

Europe isn’t doomed to inexorable decline — and in fact is doing better than most people realize, said the IMF’s Kristalina Georgieva. Much of the European Union’s policymaking bubble has been gripped with despair since the bloc’s weakness was exposed during a recent confrontation with the U.S. over Greenland. While U.S. President Donald Trump eventually backed down, the European military response — sending a symbolic handful of soldiers to the North Atlantic island — underlined that had the White House really wanted to seize Greenland, Europeans would have had no choice but to accede. But in an interview with POLITICO, Georgieva, managing director of the International Monetary Fund, said the pessimism was misplaced. In an end-of-year shortlist of top-performing economies put together by the Economist, she noted, the top 10 included seven EU countries, with Portugal in the top spot. The Iberian economy has recorded steady growth while comfortably paying down its debt in the past few years. That’s a fact, she said, that should be celebrated. “Europeans — we are modest people. We don’t brag,” the IMF head stated. She recalled how a U.S. colleague had recently done “something marginal.” “He said ‘oh, let’s look at this. I’m great. I’m fantastic,’” Georgieva recounted. “In Europe you do something great and you say ‘not too bad.’ In this world we are in now, you have to brag a little, exude confidence.” Even before the Greenland standoff, a sense of despair had settled over the top echelons of European economic decision-making. Mario Draghi, former head of the European Central Bank, warned that the bloc faced “slow agony” if it didn’t reform. Georgieva acknowledged the increasingly sharp-elbowed way in which countries now operate — one that leaves little room for multilateral organizations like her own IMF. In a speech earlier on Monday she acknowledged that the world had become “multipolar” — code for a new era of jostling geopolitical blocs that has replaced unilateral American dominance. Speaking to POLITICO, Georgieva said that “geopolitical factors play an increasingly bigger role in defining the world economy.” On Greenland, she said the fact that “allies find it more difficult to retain their sense of common purpose” was a “significant change.” But she insisted that the “destiny of Europe is in the hands of Europeans.” The IMF’s list of advice to reform the EU’s economy echoes Draghi’s own, contained in his competitiveness report from 2024: They include strengthening the single market, cutting regulations on businesses, and integrating the continent’s fragmented energy and financial systems. Mario Draghi, former head of the European Central Bank, warned that the bloc faced “slow agony” if it didn’t reform. | Olivier Matthys/EPA Georgieva said it was “paramount” for the EU to press ahead with reform. “Get your own house in order,” she said. Three of the Economist shortlist’s best-performing countries — Ireland, Portugal and Greece — were put under IMF supervision at the height of the eurozone crisis. There, they had to agree to painful adjustments known as structural reform programs, which included tax hikes and brutal cuts to public services. In the case of Greece in particular, those structural reforms resulted in a sharp increase in unemployment and poverty levels; gross domestic product per capita is still not at its pre-crisis level. But, said Georgieva, their current success is proof that countries, and the EU as a whole, can change their economic trajectories. Asked whether Europe should consider retaliating against U.S. aggression by selling off assets like government bonds, a suggestion included in a recent analyst report from Deutsche Bank, the senior official urged caution. “I would say that the smooth functioning of the international monetary system is of value to all countries,” she said. “Disturbing that smooth functioning of the international monetary system with the same token can bring negative impact.” The Bulgarian boss of the Washington, D.C.-based fund did, however, back a deeper pool of joint EU debt — an idea favored by Draghi but regarded with suspicion by frugal countries like Germany and the Netherlands. As for the disbursement of $8.1 billion in IMF funds to Ukraine to help the country meet its financing needs, Georgieva said she was aiming to hold an IMF board meeting in the second half of `February at which the board could approve the program and start paying out funds. Though the amount is relatively small — less than a tenth of the €90 billion that the EU has agreed to lend to Ukraine — IMF approval is a signal of confidence for financial markets. The IMF chief also said that a meeting “is scheduled” with U.S. Treasury Secretary Scott Bessent regarding the situation in Venezuela, and that it would happen in the “nearest future.” The IMF stopped working with Venezuela in 2019. The fund estimates that the South American country’s economy, battered by U.S. sanctions and plagued by mismanagement, has shrunk to a third of its previous largest size. Since the U.S. captured Venezuelan President Nicolás Maduro at the start of the year, it has floated the possibility of allowing Venezuela to access IMF financing again.

PARIS — The French government survived two no-confidence votes over its fiscal plans Friday, moving one step closer to finally adopting a proper state budget for the year. The motion of no confidence put forward by the far-left France Unbowed was backed by 269 MPs — 19 votes short of passing— while the far-right National Rally’s version netted support from a mere 142 lawmakers. The two parties attempted to bring down Prime Minister Sébastien Lecornu’s government following his decision to use a constitutional backdoor to pass France’s 2026 budget after lawmakers failed to approve one before the end of 2025. That maneuver, Article 49.3 of the constitution, allows the government to ram through legislation without a vote but in turn gives opposition lawmakers the opportunity to respond by putting forward a no-confidence vote. Lecornu triggered that measure on Tuesday to pass the part of the budget that concerns raising revenue. He is expected to use it again Friday to pass the final part of the budget concerning government expenditures. Lecornu had been expected to survive, as the political extremes do not have enough lawmakers among themselves to bring down the government. The more centrist Socialists, who have played a kingmaker role during the prime minister’s tenure, did not try to topple the government after Lecornu offered them several last-minute budgetary concessions. France is under pressure from financial markets and international institutions to cut a budget deficit that came in at 5.4 percent of GDP last year and debt that is projected to go up to 118.2 percent of GDP in 2026, according to the government’s forecast. The country’s hung parliament was, for a second year in a row, unable to craft a state budget on its own despite Lecornu’s pledge to let lawmakers search for a consensus. They did, however, agree to a deal on funding the country’s social security system. Without proper plans in place, lawmakers were forced to roll over the 2025 budget into the new year until proper fiscal plans could be finalized. Lecornu said last week he would use Article 49.3 to enact a budget despite having ruled that option out in October. The 2026 budget being enacted is projected to carry a deficit of 5 percent of GDP and remains under excessive deficit procedure from the European Commission. Paris has pledged to bring the figure below 3 percent of GDP, as required by EU rules, by 2029.

BERLIN — As Europe’s traditional Franco-German engine splutters, German Chancellor Friedrich Merz is increasingly looking to team up with hard-right Italian Prime Minister Giorgia Meloni as his co-pilot in steering the EU. The two are set to meet at a summit in the opulent Villa Doria Pamphilj in Rome on Friday to double down on their budding alliance. They are both right-wing Atlanticists who want to cool tensions with U.S. President Donald Trump. And they both have their frustrations with French President Emmanuel Macron. In years past, Germany would traditionally have turned to France at decisive moments to map out blueprints for the EU, so it’s significant that Merz is now aligning with Meloni in his attempt to drive forward core European priorities on trade and industry. In part, Merz’s gravitation toward Meloni is driven by annoyance with France. Berlin is irritated that Paris sought to undermine the landmark Mercosur trade deal with South America, which the Germans have long wanted in order to promote industrial exports. Germany is also considering pulling out of a €100 billion joint fighter-jet program over disputes with the French. Against that backdrop, the alignment with Rome has a compelling logic. During Friday’s meeting, Merz and Meloni are expected to sign up to cooperation on defense, according to diplomats involved in the preparations. It’s not clear what that involves, but Germany’s Rheinmetall and Italy’s Leonardo already have a joint venture to build tanks and other military vehicles. Perhaps most ambitiously, Italy and Germany are also teaming up to draft a new game plan to revive EU industry and expand exports in a joint position paper for the Feb. 12 European Council summit. Berlin and Rome style themselves as the “two main industrial European nations” and have condemned delays to the Mercosur agreement. That language will grate in Paris. IN FOR THE LONG HAUL For Giangiacomo Calovini, a lawmaker from Meloni’s Brothers of Italy party, who heads the parliament’s Italian-German friendship group, the Merz-Meloni alliance makes sense given Macron’s impending departure from the European stage after next year’s French election. “[Our] two countries have stable governments, especially if compared with France’s,” he said. “It is clear that Meloni and Merz still probably have a long path ahead of them, during which they can work together.” Safeguarding the relationship with Trump is crucial to both leaders, and both Merz and Meloni have sought to avoid transatlantic blow-ups. They have been supported in their firefighting by their foreign ministers, Johann Wadephul and Antonio Tajani. “Giorgia Meloni and Friedrich Merz have represented the European wing most open to dialogue with President Trump,” said Pietro Benassi, former Italian ambassador to Berlin and the EU. “The somewhat surreal acceleration [of events] driven by the American president is confirming a convergence in the positions of Italy and Germany, rather than between Italy and France, or France and Germany.” In contrast to the softly-softly approach in Rome and Berlin, Calovini accused Macron of unhelpfully “contradictory” behavior toward Trump. “He acts as the one who wants to challenge the United States of America but then sends texts — that Trump has inelegantly published — in which he begs Trump to have dinner,” he complained. GOOD CHEMISTRY Officials in Berlin now privately gush over the growing cooperation with Meloni, describing the relationship with Rome as dependable. “Italy is reliable,” said one senior German government official, granted anonymity to speak candidly. It’s not an adjective authorities in Berlin have often used to describe their French counterparts of late. “France is more verbal, but Italy is much more pragmatic,” said Axel Schäfer, a senior lawmaker in Germany’s Social Democratic Party long focused on German-Italian relations. An Italian official also praised the “good chemistry” between Merz and Meloni personally. That forms a marked contrast with the notoriously strained relations between Meloni and Macron, who have frequently clashed. In their effort to draw closer, Merz and Meloni have at times resorted to hyperbole. During his inaugural visit to Rome as chancellor last year, Merz said there was “practically complete agreement between our two countries on all European policy issues.” Meloni returned the sentiment. “It is simply impossible to cast doubt on the relations between Italy and Germany,” she said at the time. MARRIAGE OF CONVENIENCE That is overegging it. The two leaders, in fact, have considerable differences. Meloni refused to support an ultimately doomed plan, pushed by Merz, to use frozen Russian assets to finance military aid for Ukraine. Meloni also briefly withheld support for the Mercosur trade deal in order to win concessions for Italian farmers before ultimately backing it. Critically, Rome and Berlin are likely to prove very awkward allies when it comes to public finances. Italy has long pushed for looser European fiscal policy — and been a natural ally of France on this point — while Germany has served as the continent’s iron disciplinarian on spending. But even here there has been some convergence, with Meloni cutting Italy’s spending and Merz presiding over a historic expansion in debt-fueled outlays on infrastructure and defense. Fundamentally, much of the growing alliance between Merz and Meloni is a product of shifts undertaken for their own domestic political survival. Meloni has dragged her nationalist Brothers of Italy party to the center, particularly on foreign policy matters. At the same time, the rise of the far-right Alternative for Germany (AfD) party in Germany has forced Merz to shift his conservative party sharply to the right on migration.     This ideological merging has allowed for a warming of relations. As Merz has sought partners on the European level to drastically reduce the inflow of asylum seekers coming to Europe, to reduce regulation and to push for more trade — and provide a counterbalance to Macron — Meloni has become an increasingly important figure for the chancellor. Still, Stefano Stefanini, a former senior Italian diplomat and NATO representative, said there would always be limits to the relationship. “It’s very tactical,” he said. “There’s no coordinated strategy. There are a number of issues on which Meloni and Merz find themselves on the same side.” Stefanini also noted that spending commitments — particularly on military projects — would be an area where Rome would once again find itself in a more natural alliance with France. “On defense spending Italy and France are closer, because Germany has the fiscal capacity to spend by itself, while Italy and France need to get as much financial support as they can from the EU,” he said. Despite such differences, Meloni has seized her opening to get closer to Merz. “Meloni has understood that, as there is some tension in the France-Germany relationship, she could infiltrate and get closer to Germany,” said Marc Lazar, an expert on Franco-Italian relations who teaches at the Luiss University in Rome and at Sciences Po in Paris.

Europe is laying the foundation for renewed economic growth. Regulatory simplification is gaining traction. Public investment is accelerating in technology, energy and defense. Private capital is supplementing these efforts. These are meaningful steps, which, in the eyes of many, are long overdue and still need to gain pace. But an additional ingredient is required.  Our new research finds that closing the continent’s competitiveness gap requires Europe’s major companies to place a new emphasis on entrepreneurial courage: that is, the increased willingness to embrace uncertainty and take calculated risks in service of renewal and growth. Corporate leaders willing to make bold investments and engage in modern public-private collaborations, much like their American and Asian peers, stand to reap the rewards for acting decisively and with greater urgency.   Europe’s global competitiveness is ultimately a function of individual companies making a material difference, particularly large corporations and dynamic scale-ups. And it doesn’t require many acting boldly to have a disproportionate impact. In examining a sample representing about 15 percent of the U.S. economy, the McKinsey Global Institute found that more than two-thirds of productivity growth between 2011 and 2019 was driven by just 44 ‘standout’ companies. Meanwhile, 13 standout companies drove a similar proportion of the German sample’s productivity growth during the same period. These highly valued ‘outliers’, together with differences in growth and return on invested capital, underpin much of the valuation gap between European companies and their international peers, as highlighted in research we conducted on UK capital markets.   The status quo is not tenable.  Since the global financial crisis, Europe has endured a prolonged slump in private investment that has been especially pronounced in future-shaping industries. In the past five years alone, our analysis found that companies with headquarters in the United States have invested €2 trillion more in digital technologies such as artificial intelligence (AI) than their European peers. And in traditional manufacturing industries, China is out-investing Europe at a rate of 3:1.  > This investment gap not only stifles European economic growth, but prevents > the continent from inventing, developing and deploying the technologies it > needs to increase productivity and drive prosperity.  And the need to boost investments is growing: when the landmark Draghi report on European competitiveness was released in 2024, it estimated that an additional €800 billion needed to be mobilized annually to start closing the continent’s competitiveness gap. With the required additional investment in defense, that figure is now estimated to be €1.2 trillion annually for the next five years.  Of course, the regulatory landscape is also important. The positive news over the past year is that the European Commission has implemented dozens of initiatives, from regulatory simplification to streamlining and enhancing funding and market-creation mechanisms, as well as preparing to propose a ‘28th regime’ to make it easier for companies to scale across its 27 member states. Governments are also stepping up, with growth in strategic public investment in technology, energy and defense capabilities creating tailwinds for private investment. For instance, Germany amended its constitution to exempt defense spending above 1 percent of GDP from its debt brake and established a €500 billion fund to support infrastructure and climate-neutral investment. Similar programs are taking shape in France, Italy, the Netherlands and the Nordics.  But, while private sector activity shows some signs of acceleration, more is needed. Driving Europe’s economic vitality requires the emergence of standout companies, acting both individually and in close collaboration with the public sector. Without it, Europe risks another decade of ‘secular stagnation’: sluggish real GDP growth of around 1 percent annually as excess savings and a dearth of investment depress aggregate demand and push interest rates back to near zero.  > So, what does it take to show more entrepreneurial courage? Informed by our > global research and what we see standout firms doing, our research highlights > a range of actions leaders could explore.  One example is making broader ecosystem plays, such as semiconductor company ASML joining with the Dutch government and regional partners to launch Project Beethoven, a €2.5 billion public-private investment to ensure ASML’s continued presence and expansion of the broader microchip cluster in Eindhoven. Another is re-inventing potential stranded assets to position them for the industries of the future, illustrated by the range of European utilities converting or marketing former coal and gas power plant sites for hyperscale data centers. And a clear one is radical adoption of AI and automation technologies, which MGI’s research shows could add up to 3.4 percentage points to annual productivity growth globally through 2040.  > Europe has an opportunity to take steps to decisively alter its competitive > trajectory.  But while public sector leaders can lay the foundations necessary to accelerate investment and growth, the continent’s leading companies are distinctly positioned to amplify this and make a critical contribution to the continent’s prosperity, security and strategic autonomy. There’s growing consensus on what needs to be done. What’s now needed is a hefty dose of entrepreneurial courage to act.

PARIS — Just as Europe needs its Franco-German power couple to unite to tackle U.S. President Donald Trump’s growing menace to Greenland, relations between Paris and Berlin are under strain. German Chancellor Friedrich Merz is vowing to form a joint front with his French counterpart Emmanuel Macron in the coming days — revving up the cross-Rhine alliance often described as the engine of the EU — to secure a breakthrough with Trump. But building what Merz calls a “common position” with Macron won’t come easy. Both sides will need to put aside months of frustration, suspicion and bad blood. French diplomats are worried by Berlin’s increasing assertiveness in styling itself as Europe’s dominant player, while the Germans are fed up with the French over a stalled joint fighter-jet program, their opposition to an EU-Mercosur trade deal, and a shelved plan to use Russian assets to finance aid for Ukraine. The contrast between the French and German leaders in their approach to Trump was also on full display in their response to the U.S. president’s threat on Saturday to impose tariffs on EU countries that opposed his takeover of Greenland. Macron, who often draws on a pugnacious Gaullist tradition of seeking greater independence from the U.S., immediately vowed to punch back hard against Trump with the EU’s trade arsenal. The more emollient Merz, an avowed Atlanticist, played up the prospect of talking the U.S. president back from the brink. Merz on Monday publicly acknowledged that Germany differed markedly on tone with France, which “wanted to react a little more harshly than we do” because Paris was less exposed to the onslaught of an all-out trade war with the U.S. For the French, one infuriating obstacle to a unified position with Berlin is that Germany’s coalition government is internally divided in its views. While Macron is raising the prospect of using the EU’s trade “bazooka” — the Anti-Coercion Instrument — to retaliate against Trump, Germany’s position is a muddle. “Different German politicians are saying different things,” complained one European diplomat. “If you listen to Germany’s finance minister, he says we should do it,” he added, referring to Lars Klingbeil’s support for Macron’s approach. Others, including Germany’s foreign minister, then sounded considerably less enthusiastic, the diplomat continued, after “their ambassador told colleagues just days ago [the bazooka] should be on the table.” While Merz is confident he can align with Macron this week to tackle the crisis created by Trump, the difficulties plaguing Germany’s relationship with France run deeper and will likely take far longer to fix. “In the last six months, the Franco-German engine hasn’t produced a single thing,” said one EU official who was granted anonymity, like others in this piece, to speak candidly about the bloc’s most important relationship. SHIFTING BALANCE OF POWER Paris has long wanted Germany to play a more ambitious role in supporting France’s grand ambitions for Europe, but Berlin is now flexing more diplomatic muscle than France expected. Germany is on track to build up a far bigger army than its neighbor, and is expected to be the only EU economy in the global top 10 by 2050. While Macron is hamstrung at home by massive public debt and government instability, Merz has increasingly been putting himself on the front line of European politics. He burnished his credentials on Ukraine as the top negotiator during a summit in Berlin late last year, which saw progress on security guarantees between Ukraine and the U.S.   Merz has also sought a leading role in conversations with Trump, even though he hasn’t always appeared as a model European in doing so. He told reporters that if the U.S. president “can’t get along with Europe,” he can “at least make Germany [his] partner.” The implication Berlin could go it alone is hardly music to French ears. “Germany is much more vocal, Merz wants to be comfortable with a more political role,” said a second European diplomat. “And it is upsetting the French.” To the Germans, the French talk a good game on big European projects but don’t live up to the hype. Berlin is irritated that Paris promotes diversification from the U.S. but then tried to block a landmark trade deal with South America. It is also annoyed that France seeks a leadership role on Ukraine but contributes far less to Kyiv than Germany does. That German frustration over support to Kyiv boiled over in this month’s debate over how the EU’s €90 billion loan to Ukraine should be used to support the European arms industry. The French made their traditional proposal that the money should be used to buy European weapons — which in turn would support French industry. The Germans hit back that preferential treatment should instead be given to companies from countries that had made the biggest contributions to Ukraine — thereby helping German industry. Given France’s lagging contributions on Ukraine, “this is a pretty clear ‘fuck you’ to Paris,” a third EU diplomat said.  Michel Duclos, a researcher at the Institut Montaigne and former French ambassador to Syria and Switzerland, said: “On Ukraine, the Germans consider that they are making all the efforts, so when the French say they want to run [military] operations, the Germans think that’s enough.” “The fear in France is that the German defense budget will at some point be double that of France, and for Paris, it would be a historic shift,” he added.  Duclos also noted the German resentment over Mercosur: “If we want more strategic autonomy, we need new partnerships,” including the EU-Mercosur trade deal, he said. “For the Germans, we don’t look serious.” FRUSTRATIONS ON MERCOSUR AND JETS     When it came to finalizing that long-delayed trade deal with  Mercosur, Berlin initially wanted to get Paris on board by giving in to various French concessions, but eventually gave up. “The country is on the brink of becoming ungovernable,” one German government official said of Macron’s inability to push back against fierce domestic opposition, particularly from farmers.   The FCAS joint Franco-German jet-fighter project is proving another major bugbear. The €100 billion venture is on life support after Paris and Berlin failed to agree on how to proceed last month. According to Peter Beyer, a foreign policy lawmaker from Merz’s conservatives, French companies are exerting “massive pressure,” and “even a French president apparently cannot see beyond that.”   “Now the thinking is going so far as to perhaps do it without the French, which I think would be a disaster, but at the moment there is no progress,” he said, referencing suggestions that Germany is looking at developing a fighter jet without French manufacturer Dassault Aviation.   All of those discussions about how far the Germans want to team up with France on weapons are now also colored by the far-right National Rally leading polls ahead of next year’s presidential election in France. “The prospect of the National Rally coming to power is already weighing heavily on French-German discussions on defense,” said Jacob Ross, a research fellow at the German Council on Foreign Relations. Laura Kayali and Gregorio Sorgi contributed reporting.