Excessive trade surpluses with the U.S., and large structural trade deficits with China, should be a serious concern for the European Council (a forum of heads of state and government) and its executive commission in Brussels.

As things now stand, nothing indicates that those existential questions are about to dislodge the futile bellicose drift of both forums. In fact, it increasingly looks like the E.U. leaders – with minor exceptions – want to use the hyperbole of external security threats as a cover for egregious errors in managing their ailing economies.

Mercifully, public opinion pressures in France and Germany are forcing changes that could ultimately lead to overdue corrections affecting jobs and incomes.

True to form, France’s long brewing socio-political and economic crises have finally led to fundamental institutional issues, questioning the legitimacy of the country’s president whose approval rating last week stood at a record low 14%.

The economy is at the center of the ongoing political storm, with a runaway public debt of 114.1% of GDP and a budget deficit that at the beginning of this year has stabilized around its 2024 average of 5.8% of GDP.

The Franco-German growth engine is dead

That has triggered a downgrade of French government debt to A+ from AA-. A widely watched spread with German bonds is roughly stable, but France is now paying the same as Italy (3.37%) for ten-year loans, even though Italy’s public debt (135% of GDP) is nearly 20% higher. But, due to political instability, the French budget outlook is considered “uncertain,” while Italy’s outlook is classified as stable.

The French budget “uncertainty” is read by credit rating agencies as a risk that the French public opinion will not peacefully settle for higher taxes and lower social benefits (“acquired rights”) to pay for years of economic mismanagement.

But undeterred, and instead of focusing on economic and social issues, the French government is now leading the charge of the “coalition of the willing” to escalate the war in Ukraine that was essentially caused by fundamental hostilities between the U.S. and Russia.

Germany -- a country that pushed the world into two largest human butcheries the history has ever known -- is part of that coalition. And its former leader, Angela Merkel, is admitting that Minsk agreements of 2014 -- designed to peacefully resolve the question of Donbas province in Ukraine – were never meant to be honored. They were concluded, she said, to freeze the conflict and give Ukraine, and its supporters, more time to prepare for war with Russia.

Merkel’s successor, Friedrich Merz, is a strong supporter of war with Russia. And, blissfully ignoring German history, he wants to build the strongest army in Europe to confront a nuclear-armed superpower like Russia.

U.S. should look again at its E.U. trade accounts

Merz wants all that while watching his sinking approval rating of 26% and survey findings that two-thirds of German population have no confidence in his policies to deal with domestic issues caused by two years of economic recession (i.e., 2023 and 2024) and no economic growth in the first half of this year.

The Franco-German tandem, the proverbial engine of E.U.’s economy, is dead.

And that also means that the European Council cannot control a rudderless European executive commission. Their only consensus is about stepping up a military buildup to fight Russia.

There are now only three major E.U. countries -- Spain, Italy and Portugal -- looking after themselves with a firm focus of their economies. They are growing at respective annual rates of 2.8%, 0.5% and 2% in the first half of this year.

So, yes, growing jobs and incomes and balanced trade should be the principal objectives of the largest trading bloc in the world.

Exporting recession, the German style, will no longer do.

Washington, with its E.U. $236 billion trade deficit (in 2024), will soon remind its European allies that a 20% increase of their surplus in the first seven months of this year is unacceptable.

And so is Germany’s $85 billion surplus in 2024, accounting for 36% of U.S. deficits on E.U. trades. That just shows that the E.U.’s largest economy is living off its American trade partner while opposing Washington’s efforts to focus on balanced trade and to put out Europe’s fires.

Trade problems with China are even more serious. In the first eight months of this year, the E.U. ran a $197 billion trade deficit with China. But the worst part of this story is that the E.U. exports to China were less than half of China’s sales to the E.U.

That’s a red scarf for Washington because America, the E.U.’s largest trade partner, is being shortchanged: E.U. exports to the U.S. are nearly double of what E.U. buys from the U.S.

The E.U. needs some allied attention in Washington. If President Trump saw these numbers, he probably would be fizzing with fury about the E.U. – and Germany in particular – beggar-thy-neighbor trade policies.