Politico: France, Germany work on EU pact to boost industry, soften car policy

France and Germany are negotiating a broad agreement aimed at bolstering the European Union's industrial base while easing pressure on the bloc's automotive sector, as Paris and Berlin seek to revive the EU's struggling economy ahead of key policy decisions later this year.

According to POLITICO, the proposed deal would combine France's push for stronger "Made in Europe" protections in the EU's planned Industrial Accelerator Act with Germany's efforts to soften the bloc's planned 2035 phaseout of new combustion-engine cars.

The agreement follows joint ministerial meetings in Germany last week, where French President Emmanuel Macron and German Chancellor Friedrich Merz tasked their governments with developing a compromise on industrial and automotive policy.

Under the emerging framework, Germany would back stricter "Made in Europe" provisions that would limit which non-EU countries qualify as "trusted partners" for public procurement and subsidy programmes. In exchange, France would support greater flexibility on the EU's planned ban on the sale of new petrol and diesel cars from 2035.

"We have been tasked to build a comprehensive deal on these topics," French Industry Minister Sébastien Martin told POLITICO. "It would be great to have a deal in autumn. I am sure we could get other countries like Italy on board. All countries are waiting for a Franco-German agreement."

Two senior German officials, speaking on condition of anonymity, confirmed that negotiations on the proposed pact are under way.

Officials from both countries cautioned that discussions remain at an early stage and that further concessions are likely before any final agreement is reached. Talks are expected to continue throughout the summer, with the aim of reaching a deal before a meeting of EU industry ministers on 24 September and an EU leaders' summit on October 15-16.

The negotiations come as the European Commission seeks to secure approval of its Industrial Accelerator Act by the end of the year, while the EU is also engaged in difficult trade discussions with China over its widening trade imbalance.

The talks also reflect growing political urgency in both capitals. Macron, who cannot seek another term under France's constitutional term limits, faces the prospect of next year's presidential election, in which far-right leader Marine Le Pen currently leads opinion polls. Her National Rally party has pledged to reduce France's contributions to the EU budget if it wins power.

The proposed compromise would mark a notable shift for both governments. Germany has long argued that carmakers should be given greater flexibility in meeting emissions targets and has advocated a larger role for alternative fuels. France, traditionally a strong supporter of the 2035 target, has recently signalled greater openness to easing the rules for manufacturers that strengthen European supply chains and domestic production.

The most significant disagreement remains over the scope of the Industrial Accelerator Act. France wants eligibility for "Made in Europe" benefits to be initially limited to the EU's 27 member states, while Germany has argued that close partners such as the UK and Canada should also qualify.

"Made in Europe only makes sense if it is made in Europe," Martin said.

By Aghakazim Guliyev