BRUSSELS – Even before the collapse of the French and German governments, the European economy was experiencing enough difficulties. Shy growth and competitiveness lagging behind the United States and China. A struggling auto industry. Where to find billions for defense against Russia? And now Donald Trump threatening customs tariffs.

Solutions will be more difficult to find as the two countries which represent almost half of the eurozone economy remain stuck in political paralysis until 2025.

Where the so-called Franco-German axis once existed to move Europe forward, today there is a void. French Prime Minister Michel Barnier resigned Thursday after lose a vote of confidence, and while President Emmanuel Macron appoint a successor, the new head of government will not have a majority. Elections are not constitutionally permitted until at least June.

The German coalition led by the Social Democrats Chancellor Olaf Scholz with the pro-business Greens and Free Democrats fractured in November, triggering early elections on February 23. Talks to form a new government could last until April.

At least Germany’s likely new chancellor, the leader of the conservative opposition Friedrich Merz, appears willing to ease constitutional restrictions on borrowing to enable favorable growth expenses and investments, said Mujtaba Rahman, Managing Director Europe of the Eurasia Group.

France could, however, be faced with a “complete paralysis of the the economic question,” » said Rahman. “It is highly unlikely that they will achieve a political balance with a mandate to implement a credible fiscal course correction.”

“And this is obviously a problem for Europe because it means that the great potential of the European economy is not what it should be otherwise, because France and Germany are not operating at full capacity. regime,” he said.

Then there is the lagging business environment in Europe, analyzed by the former president of the European Central Bank, Mario Draghi, in a report which contains recommendations such as common borrowing to support public investment; EU-wide industrial policy; and integrate financial markets to help startups raise capital. However, “nothing can move in Europe without a Franco-German alignment,” Rahman said.

In the meantime, The European automotive industry has called for a review of the EU’s strict emissions standards to 2025 instead of 2026, saying the demand for electric cars This means they won’t be able to avoid heavy fines and the money will be better used to develop new electric vehicles.

Anne-Laure Delatte, a French economist and research director at the National Center for Scientific Research, said financial markets remain cautious but are not overly alarmed by France’s political instability. But the economic weakness of France and Germany could have wider implications for the European Union.

“This could either weaken Europe’s position globally or transfer power and influence to other European countries like the Netherlands or Spain, which are performing well at the moment” , she said.

France is expected to grow 1.1% this year and 0.8% next year, while the German economy is expected to contract 0.1% this year, the second consecutive year of contraction, and rebound modestly with 0.7% next year. Germany faces challenges from a shortage of skilled labor, excessive bureaucracy and rising energy prices, and efforts to resolve these problems have been blocked by disputes at the within the Scholz coalition.

European Commission President Ursula von der Leyen, head of the EU executive, is endowed with significant powers, particularly in trade matters, a key EU authority delegated to Brussels by member countries. But von der Leyen can’t do much without the political support of the two largest member countries, whose national budgets are larger than that of the EU.

Perhaps the most pressing question is how to respond to US President-elect Donald Trump, who takes office on January 20. European officials are trying to defuse a potential trade conflict involving new U.S. tariffs or import taxes on European goods that would seriously damage the continent’s growth. export-oriented economy.

Europe could decide not to retaliate against U.S. tariffs, thereby avoiding a mutually destructive cycle of retaliation. The bloc could also pledge to buy U.S. liquefied natural gas to appease Trump, or spend billions more on Ukraine’s defense to address his complaints that European countries are failing to meet EU commitments. NATO on defense spending.

Europe is experiencing only modest growth as inflation-hit consumers remain cautious about their spending. The economy is expected to grow by 0.8% this year and 1.3% next year for the 20 EU member countries that use the euro, according to the European Commission.

Even if the direct impact on growth is small, the political impasse means Europe is missing an important opportunity to engage with Trump, said Holger Schmieding, chief economist at Berenberg Bank.

“The ideal would be for Europe – at a time when Trump is not yet in power – to prepare a major offer for Trump, such as: we spend a lot more on defense, if you do not disappoint us on of commerce and Ukraine This unfortunately does not happen.

“The risk is that Trump on trade will be tougher on us because Germany and France are absent,” he said.

Von der Leyen may offer to get countries to buy more US natural gas and remind Trump that the EU could retaliate, but “the offer Europe can make to Trump is small, rather than a big offer where there would be German and French money behind it. he.”

The European Commission estimates that as much as 500 billion euros ($528 billion) will be needed over the next decade to meet the bloc’s security needs. Defense Commissioner Andrius Kubilius indicated that the common defense bonds could raise this enormous sum. But it’s hard to imagine moving forward without Germany, the bloc’s largest member.

Big issues such as defense and competitiveness “require the fiscal and parliamentary resources of the largest member states and the question is whether Germany and France are able to enable this at the European level,” Rahman said.

“I think the answer is probably yes, but I feel a little less sure than if Germany and France had not gone through this very difficult political period.”

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McHugh reported from Frankfurt, Germany. Associated Press reporter Tom Nouvian in Paris contributed.