EU Defense Bonds Off the Table as France Faces Political Crisis

In a critical move, Germany, supported by its allies, has successfully blocked the proposal for new joint borrowing to fund essential EU projects, including defense. The decision comes as European leaders prepare for a summit to outline priorities for the next five years, focusing on trade tensions, the war in Ukraine, and economic growth.

Officials attribute the setback to the political upheaval in France, where President Macron's domestic challenges have weakened French influence on EU policy. The European elections further complicated matters with gains for far-right groups opposing shared debt and climate initiatives.

Despite Ursula von der Leyen's expected re-nomination as European Commission President, the contentious issue of joint borrowing remains sidelined. Mario Draghi, a longtime advocate for shared debt, faces uncertainty in including it in his upcoming report on EU competitiveness.

Germany's Chancellor Olaf Scholz and Finance Minister Christian Lindner have firmly opposed new joint debt, emphasizing increased national defense spending. Other nations like the Netherlands and Austria also resist the idea, citing insufficient preparation for implementing eurobonds.

There it is again, the north-south-antagonism that has been growing as the eurozone is failing in its goal to converge the different productivity levels of the participants.