GERMANY-Macron To Host Scholz As Relations Remain Tense

French President Emmanuel Macron hosts German Chancellor Olaf Scholz for a working lunch today in an effort to improve relations between the EU's two economic powerhouses. Franco-German relations have taken a hit in recent months due to a range of issues. Situation has deteriorated to the point where a long-standing conference of French and German ministers has been postponed to 2023 due to the scale of disagreements. Sources of tension include:

• Germany's EUR200bn energy relief scheme. France (and other EU nations) argue the scheme distorts the single market by effectively providing state aid to German industry. Berlin argues EUR100bn fuel/energy subsidy scheme from France does the same, but Paris says this supported households and small businesses, whereas German scheme benefits large, internationally competitive industries.
• France refuses to agree to MidCat gas pipeline from Spain that could provide LNG supplies to Germany. France says the plan is not economically/ecologically sound. Berlin suspects France sees MidCat as threat to its domestic nuclear/renewables sectors.
• These issues - as well as French anger over Germany continuing its nuclear shutdown plans and Berlin's refusal to sign up to pan-EU military investment projects - have been seen to come as Scholz looks to shore-up his uneasy governing coalition at the expense of unity with France and other EU member states.