May 03, 2024

Time for a Franco-German Plan for Ukraine

Germany and France haven’t managed to devise a joint Ukraine strategy. Making good of that missed chance is now essential. It will involve talking about debt. 

Ukrainian President Volodymyr Zelenskiy, French President Emmanuel Macron and German Chancellor Olaf Scholz hold a news conference in Kyiv, Ukraine June 16, 2022.
All rights reserved

Before Russia’s full-scale invasion of Ukraine in February 2022, Russia policy was one of the few fields where there was a natural Franco-German entente. For a long time, both Berlin and Paris sought an understanding with Russian President Vladimir Putin. Both ignored the warnings of fellow European Union member states in the east. For Germany, economic interests dominated. France, or more precisely President Emmanuel Macron, was obsessed with drawing Moscow toward Europe and away from China. With the Minsk process they had attempted to keep “the Ukraine problem” under control.

Yet despite the common starting point, Russia’s invasion of Ukraine has estranged the EU’s two heavyweights. In fact, the longer the war goes on, the more the two capitals diverge. And it is all happening in public. If German Chancellor Olaf Scholz points fingers at other European countries for delivering too few weapons to Kyiv, he has France in mind. If Macron says Europe cannot act “cowardly,” he takes aim at Germany.

Ultimately, the disagreement boils down to this: Berlin seems most scared about Moscow losing. Paris seems more scared about Russia winning. France is good at deterrence postures, but it lacks the financial resolve. Germany has a frightening wallet, but is terrible at making threats.

To Threaten and to Frighten

Over the course of the war, Paris has become more hawkish. Unlike Berlin, Paris is advocating that Kyiv joins NATO. Howitzers, tanks, and missiles—it was France and the United Kingdom that moved first on deliveries and pressed Germany and the United States to follow suit. If Russia escalates, the allies must respond, Macron’s thinking runs today. Deterrence is now. Polls show that the French don’t approve of Macron’s “no red lines” approach. But that doesn’t matter. The president is in power until 2027, and as this is his second term, he cannot run for reelection.

If Macron can politically afford to take the long view, his problem is that he can’t pay for it. Paris is running a budget deficit of 5.1 percent of GDP this year. France’s lack of fiscal space is a key reason for why it is subpar when it comes to weapons donations to Ukraine.

As for Germany, Scholz has no doubts about Putin’s neo-imperial plans either. The Chancellor could also get out the financial bazooka and make Putin doubt that he can really win. But Berlin sees no good way of this war ending. Giving Ukraine a clear pathway to NATO membership would give succor to Moscow’s view that its war of conquest against Ukraine is an existential war. And if Russia get close to defeat, Putin could become unpredictable. 

Without a nuclear deterrent of its own, Germany and its chancellor are forced to move in lockstep with Washington. Even with the US now also sending long-range missiles, Scholz won’t change tack on the Taurus—the missiles system that could destroy the Kerch bridge and make the Russian grip of Crimea perilous. Berlin will reassess its position at the earliest after the US presidential election in November to see if the US nuclear guarantee still holds.

Finally, unlike Macron, Scholz faces elections next year. If he is to stand a chance, he needs to keep his core voter base intact. But a part of the traditional electorate of Scholz’ party, the center-left Social Democrats’ (SPD), are pacifists and Ostpolitik nostalgics. When the SPD’s parliamentary leader, Rolf Mützenich, calls for the conflict in Ukraine to be “frozen,” Scholz makes no effort to reign him in.

It is true that Scholz may not enjoy philosophizing with Macron over wine for hours on end, as his predecessor Angela Merkel did. But that is not the main problem. There are understandable security and political reasons for why Berlin and Paris have not managed to see eye to eye on Ukraine so far. Yet, it doesn’t mean they shouldn’t try to square the circle.

Second Chance

If we have learned something from the past few months of agonizing about what happens on Capitol Hill it is this: The American commitment to Ukraine can’t be counted on forever. The US has sprung to the rescue once more by passing a $61 billion support package for Ukraine. That will fill Ukraine’s financial gaps until the end of the year. Enough time for Europeans to come together to plan on how to meet Kyiv’s medium-term needs and show Putin that he can’t bank on Ukraine running dry of support.

Second chances don’t come around very often. To make it work this time, Paris and Berlin first need to come to terms with some hard truths.

One is that France needs to understand that Germany has its own domestic politics constraints and that Scholz will always need to keep the Americans on board to some extent, regardless of who is in the White House—for nuclear deterrence, but also for domestic public opinion reasons. Polls show that Germans by an overwhelming majority think that France is their closest partner. But it is not the force de frappe that allows Germans to sleep soundly at night.

Another hard truth is that Germany needs to acknowledge that it cannot squarely bank on the US anymore. Even if Joe Biden is reelected as US president, he might lose the majority in the Senate. The cold war with China over Taiwan could turn hot, as the cold war between Iran and Israel has done recently. A multi-front war would bring the US military and defense industry quickly to its limits. It is worth noting that the US already runs a budget deficit of 7 percent today. Only a greater Europeanization of spending and arms production will make Putin realize that Kyiv can really count on continued support.

A third hard truth is that since Putin thinks in the long term, so must the allies. More than two years into the war, Europeans still rely above all on national initiatives and improvised ad-hoc coalitions to support Ukraine. When Kyiv runs out of artillery shells, the Europeans still fail to nudge manufacturers to produce enough, while Prague builds an alliance to buy ammunition on world markets. When Ukraine’s air defense is breached, Germany donates another Patriot system and urges others to follow suit. In other words: Ukraine not only needs European money, it also really needs a European plan.

No War Without Debt

The key to a good European package that could be adopted at the European Council in June lies in a series of Franco-German understandings, perhaps moderated and pushed by Poland.

On the financing, all options have to be leveraged. There might be pockets of unspent money in the EU budget. The mandate of the European Investment Bank should be changed so it can invest in defense firms. Brussels finalizing plans to use the profits of frozen Russian assets to arm Ukraine is also welcome. Reforming the little-used euro crisis era European Stability Mechanism may also be a promising route. But these financing options are not enough.

Wars are the collisions of humans, material, and the money to pay for both. There is no big war without debt: That is a fundamental rule of economic history. The first government bonds issued in history were war bonds. This is how the renaissance city states, such as Venice and Florence, financed their permanent squabbles.

If we want Ukraine to be able to continue to resist, then there has to be debt financing. The only question is: Who will take it on? If Paris simply can’t afford to spend more, should Germany and other EU member states with more fiscal space foot the bill? That is possible, but then there would be no jointly-decided pan-European plan to give Ukraine what it needs in the medium term.

Price of Liberty

The best option: Just as during the pandemic, the EU has to agree to shoulder the costs together and set up a new debt-financed fund—perhaps between €100 and €300 billion. How can Paris convince Berlin? By addressing two German concerns, namely what the money should be spent on and who participates.

A good compromise would be to use a large portion of the fund to cover Ukraine’s immediate needs. This should include the purchase of US weapons. Another slice of the fund should go toward building up Europe’s defense industry so it can cover selected key needs for Ukraine’s territorial defense within 18 months. Should the war hopefully end earlier, the money would not be lost, but would rather be an investment in deterrence. The last portion should go to financing R&D for new weapons with incentives to advance the consolidation of Europe’s defense industry.

As for the other concern, common debt can only be issued by the EU as a whole, as there need to be taxes and other revenue streams to repay the debt once it comes to maturity. But other non-EU countries in Europe, such as the United Kingdom or Norway, could join the fund. Boosting Europe’s industry is not an EU, but a pan-European task. A model could be the EU’s research and innovation program Horizon, where many non-EU countries including the UK, pay into the EU budget to participate in the scheme that disburses science grants across Europe. Russophile countries such as Hungary will have to be brought on board, by pointing out that their domestic defense industry stands to profit, too.

Alexander Hamilton, the first US treasury secretary, said in 1790 that the public debt the American republic took on to finance its war of independence was the “price of liberty.” Now it’s up to Europe to pay that price. If we want to be in a position to take decisions at the European Council in June, the work has to start now.

Joseph de Weck is INTERNATIONALE POLITIK QUARTERLY’s Paris columnist and author of Emmanuel Macron. The revolutionary president.

Michel Duclos is Special Advisor for Geopolitics and Diplomacy at Institut Montaigne in Paris. His lastest book is Diplomatie Française.

Read more by the author

Joseph de Weck

When Opposites Don’t Attract

Emmanuel Macron is strengthening his military and wants Berlin to do the same. For a real security partner, however, he is looking to Washington.