Always a fiction, the Single Market is rapidly becoming a fantasy

Germany’s €295bn subsidy for businesses and consumers has other EU countries up in arms

Germany is now taking state subsidies to a whole new level, with a truly massive spending programme which dwarfs Liz Truss’ plans in the UK. And the rest of the EU is now deeply unhappy.

Much has been made in the media in the last two weeks of Liz Truss’ and Kwasi Kwarteng’s plans for tax cuts and the resultant rise in borrowing. As usual, however, little attention has been given to comparing Liz Truss’ policies with what is happening in the EU.

Well, let me give readers a glimpse of the breakdown that’s going on in the European Union.

Friday’s EU Summit is set to see one of the biggest EU bust-ups in years

On Thursday last week, Olaf Scholz and his colleagues unilaterally announced a state subsidy package of a size that only Germany could afford to borrow. At the same time, they have been vetoing the idea of an EU-wide response to price-capping energy prices.

There is now practically open warfare between Germany on the one side, and France, Italy, Spain, and many other EU countries on the other. On Friday the EU27’s leaders will meet in Prague for their latest Summit — and tempers look certain to the fray over Germany’s unilateral behaviour.

At stake is the very concept of the EU Single Market.

What’s behind this meltdown?

Put simply, Germany’s Chancellor, Olaf Scholz, is “doing a Trump”. When Angela Merkel was still Chancellor and Donald Trump was US President, the EU engaged in constant battles with the US administration over what Mrs Merkel and her colleagues saw as unfair competition, due to US government subsidies.

Now Merkel’s successor is fast making President Trump look like a dabbling dilettante.

Germany had already announced spending of €95bn to prop up the German economy. The latest plan out of Berlin ups the ante, with a further €200bn in state support for German businesses and consumers. And this has left the other EU countries fuming.

Ursula von der Leyen’s EU Commission is also now fracturing

Of equal concern to all Europhiles must be the fragmentation taking place within Ursula von der Leyen’s EU Commission itself.

On Monday the French and Italian EU Commissioners wrote a joint ‘op-ed’ which was published in several European newspapers. In it, they launched an attack on Germany, albeit not by name. On 30 September the French Commissioner made his views clear on Twitter.

Following the op-ed, an EU Commission spokesman was forced to distance the Commission from it, saying that it was not official policy.

The German ‘insult to injury for the rest of the EU

It is not only the sheer size of Germany’s solo response in propping up its economy that is causing ill-feeling. There is widespread anger that the EU’s energy crisis has been caused in large part by Germany’s policy of reliance on Russian oil and gas, even after Putin invaded Crimea.

Returning to President Trump, he led the charge in telling the Germans not to go ahead with the Nordstream II gas pipeline. Chancellor Angela Merkel took no notice and went ahead anyway. Now, of course, both pipelines have been blown up at the bottom of the sea, leaving Germany — and thereby the rest of the EU looking extremely vulnerable.

Remember the EU’s ‘Level Playing Field’? That’s now a distant memory.

Remember when the EU refused to let the UK Government support its own industries? Now the EU permits state subsidies across the bloc on an almost daily basis.

Against this background of the Single Market — “the jewel in our crown” — falling apart, the ‘German problem’ might seem to be just another nail in the coffin. In fact, though, this is less of a nail and more of a stake through the heart of the EU.

Will there be a “fudge on Friday”? Of course

Despite everything I have reported above, there is little doubt that the Summit will come up with a form of EU ‘fudge’, as they always do. This will not, however, disguise the tensions which are now real and prevalent throughout the bloc.

One thing is certain. The shine has definitely come off the EU’s “jewel in the crown”.

Sources: EU Commission | Commission Twitter feeds | German Government | Les Echoes ]