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The two nations have opposing ideas about atomic energy, threatening the EU’s transition away from fossil fuels

Near the French village of Fessenheim, facing Germany across the Rhine, a nuclear power station stands dormant. The German protesters that once demanded the site’s closure have decamped, and the last watts were produced three years ago. 

But disagreements over how the plant from 1977 should be repurposed persist, speaking to a much deeper divide over nuclear power between the two countries on either side of the river’s banks.

German officials have disputed a proposal to turn it into a centre to treat metals exposed to low levels of radioactivity, Fessenheim’s mayor Claude Brender says. “They are not on board with anything that might in some way make the nuclear industry more acceptable,” he adds.

France and Germany’s split over nuclear power is a tale of diverging mindsets fashioned over decades, including since the Chernobyl disaster in USSR-era Ukraine. But it has now become a major faultline in a touchy relationship between Europe’s two biggest economies.

Their stand-off over how to treat nuclear in a series of EU reforms has consequences for how Europe plans to advance towards cleaner energy. It will also affect how the bloc secures power supplies as the region weans itself off Russian gas, and how it provides its industry with affordable energy to compete with the US and China. 

“There can be squabbles between partners. But we’re not in a retirement home today squabbling over trivial matters. Europe is in a serious situation,” says Eric-André Martin, a specialist in Franco-German relations at French think-tank IFRI. 

France, which produces two-thirds of its power from nuclear plants and has plans for more reactors, is fighting for the low-carbon technology to be factored into its targets for reducing emissions and for leeway to use state subsidies to fund the sector.

For Germany, which closed its last nuclear plants this year and has been particularly shaken by its former reliance on Russian gas, there’s concern that a nuclear drive will detract from renewable energy advances.

But there is also an economic subtext in a region still reeling from an energy crisis last year, when prices spiked and laid bare how vulnerable households and manufacturers could become.

Berlin is wary that Paris would benefit more than its neighbours if it ends up being able to guarantee low power prices from its large nuclear output as a result of new EU rules on electricity markets, people close to talks between the two countries say.

Ministers on both sides have acknowledged there is a problem. “The conflict is painful. It’s painful for the two governments as well as for our [EU] partners,” Sven Giegold, state secretary at the German economy and climate action ministry, tells the Financial Times. 

Agnès Pannier-Runacher, France’s energy minister, says she wants to “get out of the realm of the emotional and move past the considerable misunderstandings that have accumulated in this discussion”.

In a joint appearance in Hamburg last week, German chancellor Olaf Scholz and French president Emmanuel Macron made encouraging noises over their ability to break the latest deadlock: a disagreement over the design of the EU’s electricity market. Ministers had been due to agree a plan in June but will now meet on October 17 to discuss the reform, aimed at stabilising long-term prices.

But the French and German impasse on nuclear has already slowed down debates on key EU policies such as rules on renewable energy and how hydrogen should be produced. Smaller member states are becoming impatient. The delay on the market design is “a big Franco-German show of incompetence again”, says an energy ministry official from another EU country who requested anonymity. 

“We have the problem with the competitiveness of the whole continent and we are focusing on how to get a competitive advantage [against] each other,” says Jozef Sikela, the Czech energy minister who chaired EU energy ministers’ meetings during last year’s gas crisis. “This way will not help us, it will not move us forward.”

Today’s deep disagreement over nuclear power was not always so stark.

France first laid out its intention to build up civil and military nuclear programmes in 1945. In the 1960s and ’70s there were even ideas about communal European nuclear plants.

The big accelerator for France was the 1973 oil crisis, which prompted a wave of reactor construction that gave it its current fleet of 56.

“Germany had some coal reserves, France had nothing,” says Bernard Accoyer, a former conservative politician in France and the head of a pro-nuclear lobby group.

The feat of engineering that followed is still a source of French national pride, although a series of outages at several reactors operated by state-owned EDF last year caused severe embarrassment and lost France its crown as the region’s top power exporter.

“Nuclear energy is part of France’s vital interests. The French would rather leave Europe than turn their backs on nuclear,” quips one senior French official.

Germany had its own reactors, including Soviet ones in the Communist east. But an anti-nuclear movement began to emerge in the 1970s when farmers and winegrowers in the south-west led opposition to a plant in Wyhl, also on the Rhine. 

That movement, nourished by fears of the atomic bomb, spawned what would later become Germany’s influential Green party, which today is a part of Scholz’s three-way coalition.

“Germany was at the frontier of the cold war and everybody knew the country would become ground zero in the event of a nuclear war,” says Arne Jungjohann, a political scientist.

After the Chernobyl disaster in 1986, that sentiment took root more deeply. Children in then West Germany were told not to play in sand and people ran inside when it rained out of fear of radiation levels. In some parts of Germany, certain types of mushrooms — and the wild boar that eat them — are still contaminated from the accident. 

The 2011 Fukushima disaster in Japan proved a point of no return. Former German chancellor Angela Merkel, who had initially pushed back plans by a previous Social Democrat and Green government to phase out nuclear power, announced closures that finally took place this year. 

“Before Fukushima . . . I was convinced that it was highly unlikely that [an accident] would occur in a high-tech country with high safety standards,” Merkel, a trained physicist, said in a speech three months after the accident. “Now it has happened.”

The government in Paris looked on aghast, former conservative president Nicolas Sarkozy recalled.

“I tell her — but Angela, what’s going on? How can this be?” he told a recent parliamentary hearing, in an account of their phone call. “She says, but Nicolas, have you not seen Fukushima? And I said — but where is the tsunami going to come from in Bavaria?”

Present-day public opinion in Germany is complicated. One survey in April found that less than a third of respondents backed shutting down the country’s nuclear plants. 

But across the river from Fessenheim, Stefan Portele, a father of four and resident of Breisach in the state of Baden-Württemberg, is relieved that the French plant is now offline. 

“It’s not safe. As long as nothing happens it’s fine, but if it does it’s a problem for millions of people,” he says. “This is still a region with the possibility of earthquakes. You never know. There hasn’t been one, but one is enough.”

On the French side, there is incomprehension, especially in the face of recent German decisions to re-fire coal power plants following the energy squeeze caused by the Russia-Ukraine war.

“Germany used to buy this nuclear power and now it is polluting us all the way here with coal,” says Dominique Schelcher, chief executive of the Système U supermarket chain and owner of Fessenheim’s store. 

The Fukushima disaster provoked some wobbles on nuclear power in France too. After a parliamentary pact with the Green party, socialist president François Hollande sought to trim reliance on the sector, which eventually led Fessenheim to be closed in 2020. The decision was endorsed by Macron after he came to power in 2017.

But by 2022, Macron had performed a volte-face and doubled down on the technology, announcing a €52bn plan for at least six new reactors and the extension of the lifespan of other sites.

German objections to France’s pro-nuclear strategy partly reflect an ideological stance felt especially strongly by the Greens — including the vice-chancellor Robert Habeck, whose ministry for economy and climate action leads negotiations on energy matters.

Giegold, who works in the ministry, says it is “totally wrong” to claim that Germany is “leading a European crusade against nuclear power”. He says he does not dispute France’s right to generate atomic energy, only the right to use EU funds to do so. “We can finance together what we agree [on] with each other,” he says.  

But other Green party figures in Berlin privately voice concern about the safety of France’s ageing fleet. 

One person familiar with the government’s thinking pointed to the EDF shutdowns last year to fix so-called stress corrosion issues and said that the country’s nuclear safety agency was “doing its job”. 

He added, however, that he feared one day “politicians [could] over-rule the nuclear safety agency”, arguing that the world has experienced a serious nuclear accident roughly every 25 years and that “the 2030s will be a dangerous decade”.

Germans also fear the French are playing a dirty game on subsidies. Prices in the EU’s electricity market are dictated by supply and demand, with power flowing to where demand is greatest. But national subsidies, which need to get the green light from Brussels, play a role in incentivising new investments, including in renewable energy. France has been pushing to be able to use some of these instruments more broadly on its existing nuclear assets as well as any new plants.

It wants, for example, to have greater access to “contracts for difference”, which set a minimum price guarantee for power providers but also a ceiling above which the state can recover any revenue. That could then potentially be reverted back to consumers and businesses on their power bills, helping to keep prices low.

“The entire debate is not so much a debate on nuclear technology, but more about industry policy and gaining advantages from cheap energy for its own industry,” says Markus Krebber, chief executive of RWE, Germany’s biggest power generator in terms of output.

A German idea mooted by Habeck for a state-subsidised electricity tariff for energy-intensive industries has similarly raised eyebrows in France and beyond, as it would also give Germany a competitive advantage.

Pannier-Runacher, the energy minister, says France is now trying to debunk “fantasies” that have arisen over what it is trying to achieve. French officials say this includes concerns they have heard from German counterparts that France could try to lure German manufacturers to the country with its more favourable energy regime, a stance they reject.

The misunderstandings took a turn for the worse this year despite previous attempts by Macron and Scholz to put on a show of unity, including at a meeting at the Élysée Palace in January. That resulted in a joint declaration with a specific embrace of hydrogen produced from “low-carbon” sources — a byword for nuclear — which was welcomed in Paris.

But weeks later negotiations over EU legislation on “green” hydrogen production, and whether nuclear power could play a role, met with objections from Berlin. It opened a period of stand-offs that included the French pulling support for new rules governing renewables in the EU at the last minute, citing a lack of recognition for the role of nuclear fuel.

The episode at the start of the year was a wake-up call over how complicated it would be to strike deals when Germany was governed by a fractious coalition, officials in Paris say.

In recent months, France has created a nuclear alliance backed by 14 countries, including Czechia, Poland and Hungary, and Pannier-Runacher says the issue is not “just a Franco-German problem”.

But France is disproportionately reliant on nuclear production compared to most EU countries, and the state-owned operator of its fleet, EDF, has a dominant market position.

France began to lobby for nuclear to be added to various texts under negotiation in multiple EU meetings this year in a way several countries found excessively pushy, according to EU diplomats and officials.

French diplomats raised their concerns on the omission of nuclear or “low-carbon” power in texts concerning everything from agreements for energy supplies with third countries to deals on what industries should be prioritised in the bloc’s “net zero industry act”.

“It was really a 360-degree strategy,” says one senior EU official.

The European Commission says that it maintains a stance of “technology neutrality” and will not intervene, as power policies are national prerogatives. But France and other countries with nuclear fleets, such as Finland and Czechia, say that by prioritising renewable power the commission is disregarding other low-carbon options.

“There is a lot of legacy regulation, which from the start has been biased against nuclear power,” says Atte Harjanne, parliamentary leader of the Finnish Greens, a rare pro-nuclear Green party in Europe. “There is a lot of work to make any new regulation technology neutral, but you are already lagging behind.”

The commission had not foreseen a growth in nuclear power returning to Europe and had assumed that it would be stable and decline as countries pushed towards the EU’s goal of net zero emissions by 2050.

But the realisation of how massive the expansion of available decarbonised electricity will need to be to feed everything from cars to households had “foster[ed] its renaissance”, the senior EU official says.

Vehemently anti-nuclear states such as Austria and Luxembourg still argue that investment in expensive nuclear power plants takes away from greener and cheaper renewables, noting that France was the only EU country not to hit its renewables targets in 2020. 

Last Tuesday, Macron and Scholz raised some hopes that the blockage on the electricity market reform at least could be resolved, with the French president flagging “very encouraging discussions” and a potential deal by the end of the month.

It is still not clear what that could entail, however.

Henning Gloystein, director for climate, energy and resources at Eurasia Group, says that if both Germany and France entered into a tit-for-tat on energy subsidies, each allowing the other to support their industries with low prices, “it’s possibly the death of the EU wholesale power market as most consumption would be locked into fixed prices”.

In the longer term, nuclear advocates are hoping that a more serene debate can emerge over the technology. 

Pascal Canfin, a liberal French MEP who is close to Macron, says policymakers will have to acknowledge that while nuclear is “not green”, “it is clearly part of the solution, so we should not exclude it from financing and so on”.

“When I interview for media and describe my view in Finland, I get private messages [from German Greens] saying you have a point,” Harjanne, the head of the pro-nuclear Finnish Greens, says.

But in Fessenheim, a cartoon in the mayor’s office gives a flavour of the lingering divisions. It shows on one bank of the Rhine the nuclear plant and on the other a coal power station and wind turbines with groups of French and German workers each saying: “They don’t understand anything!”

Starboard believes media company trades at significant discount due to its structure

Starboard Value has built a stake in News Corp NWSA 0.48%increase; green up pointing triangle and the activist shareholder plans to push for strategic and governance changes at the Wall Street Journal parent.

Starboard believes News Corp, one of the two arms of Rupert Murdoch’s media empire, trades at a significant discount to its fair market value due to its conglomerate structure, according to people familiar with the matter.

Starboard plans to recommend News Corp spin off its digital-real-estate division, which includes a stake in Australian online-property-site operator REA Group REA -1.87%decrease; red down pointing triangle and Realtor.com parent Move Inc.

The activist, run by founder and Chief Executive Jeff Smith, also plans to push News Corp to collapse its dual-class share structure, which gives the Murdochs voting power in excess of their economic ownership.

Starboard’s stake in News Corp is “sizeable,” the people said. The exact magnitude couldn’t be learned.

Reuters reported Friday that Starboard had taken a stake in News Corp.

Murdoch and his family have a roughly 40% voting stake in News Corp, according to a recent securities filing. The family has a similar voting stake in Fox Corp., which owns Fox News along with local TV stations and the Tubi streaming service.

That means that effecting change without their consent could be difficult. News Corp earlier this year tried unsuccessfully to sell Move to CoStar in a deal that would have carried a roughly $3 billion price tag.

The Murdochs last year proposed reuniting Fox and News Corp through a merger—they split apart in 2013—but withdrew the bid in January following pushback from shareholders including another activist, Irenic Capital Management, which took a roughly 2% stake in News last year and helped whip up opposition to the proposed merger. The activist was unsuccessful in convincing News Corp to spin off its real-estate websites and Dow Jones.

News Corp, which besides the Journal owns the Times of London, other newspapers and book publisher HarperCollins, is also a major player in online real estate through Realtor.com and REA, a publicly traded Australian digital-real-estate business it owns a majority of. It also has a majority stake in Australian cable-television network Foxtel.

Starboard values News Corp’s entire portfolio at over $20 billion, including about $8 billion for REA.

News Corp’s Class A shares are up roughly 14% so far this year, bringing its market capitalization to about $12 billion.

Starboard argues that News Corp’s Dow Jones business, the publisher of the Journal, Barron’s and MarketWatch, is worth more than $7 billion given the multiple of earnings that the New York Times’s parent trades at.

News Corp has been trying to find the right formula for digital growth amid a fierce battle for subscribers and online-ad dollars. During its past fiscal year, the company generated more than half of its revenue from digital for the first time in its history.

Chief Executive Robert Thomson earlier this year said News Corp expected to reduce head count by 5% in 2023 in the face of challenges posed by a surge in inflation and interest rates, which have affected all its businesses, especially book publishing and digital real estate.

The company will soon undergo a significant leadership shift.

Murdoch, News Corp’s executive chairman, last month said he would step away from executive and board duties at both News Corp and Fox Corp. in mid-November. His elder son, Lachlan Murdoch, who has served as co-chair of News Corp, will become sole chair of that company and will continue as Fox Corp. executive chair and CEO.

Recent investments by New York-based Starboard, established in 2002, include Salesforce; Splunk, which agreed to be acquired by Cisco last month for $28 billion; and Outback Steakhouse owner Bloomin’ Brands. The activist famously took full control of Olive Garden owner Darden Restaurants’ board roughly a decade ago.

After seeking government help, the property developer made promises to Chinese citizens that it didn’t keep

Hui Ka Yan, once one of the world’s richest men, led China Evergrande EGRNQ 0.00%increase; green up pointing triangle through its rise and fall. His failures in the aftermath made the property developer’s collapse a bigger problem for the country’s slumping housing market.

In 2021, when Evergrande slid into financial distress, the real estate giant turned to government officials for help resolving a mountain of debt that it couldn’t repay. Chinese authorities and regulators agreed to help defuse the developer’s risks—with conditions. Hui, Evergrande’s founder and chairman, pledged to give priority to the construction and completion of numerous homes that the company had presold to households across the country. Evergrande also promised to fully repay domestic investors who had purchased its wealth-management products following protests at its headquarters.

Two years later, around 800,000 of Evergrande’s roughly 1.2 million presold housing units remain unfinished, according to a Wall Street Journal analysis of the company’s regulatory filings. Construction at some of Evergrande’s residential projects in Hefei, Zhengzhou, Chengdu and other cities has slowed or stalled. Money stopped flowing to the holders of Evergrande’s wealth products in August, causing investors to cry foul again.

Hui’s broken promises have angered Chinese citizens who sank billions of dollars into its uncompleted apartments and investment products—adding to Beijing’s challenges of unwinding a broader property mess and restoring home buyers’ confidence in the housing market. Continuously declining nationwide home sales have shaken even the sector’s stronger developers. This month, another property giant, Country Garden, succumbed to a liquidity crisis and said it can’t pay off its international debt after its sales plunged.

Chinese regulators last month blocked an offshore debt restructuring and business-turnaround plan that Evergrande and its advisers had painstakingly put together. Hui has been placed under police surveillance and is being investigated for possible crimes, throwing the developer further into disarray. Authorities are probing whether the 65-year-old attempted to transfer assets overseas when Evergrande failed to complete and deliver its presold projects, The Wall Street Journal reported earlier.

A group of Evergrande’s bondholders warned this week that the cancellation of its restructuring plan could lead to “an uncontrollable collapse of the group,” with serious ramifications for other companies in the sector.

“Hui is essentially synonymous with the firm,” said Christopher Beddor, deputy China research director at Gavekal, a research firm. “Evergrande’s operations onshore by all accounts appear to be very heavily regulated at this point, including its dealings with bondholders and its most politically important creditors—which are the home buyers who have not received the pre-sold units.”

The effective detention of Hui was a sudden comedown for a rags-to-riches billionaire who had boldly declared in 2021 that Evergrande would stage a comeback as a successful electric-vehicle company with a much smaller property business—comments that were widely published in Chinese state media. The automaker has been unable to get its business off the ground because of cash-flow problems, and now a $500 million capital injection by an external investor is also in jeopardy.

Hui was born in 1958 and grew up in Zhoukou, one of the poorest cities in China’s central Henan province. After graduating from a university in Wuhan, he worked at a state-owned steel factory and a trading firm before starting Evergrande in 1996 in Guangzhou, in the country’s south. Two decades later, the company became the largest Chinese developer by sales.

As his wealth grew, Hui traversed the world in private jets and invested in a soccer club, hospitals, and grain and oil businesses. He became a member of China’s top political advisory body in 2008 and joined an elite standing committee in 2013. Hui rubbed shoulders with other billionaires including Alibaba co-founder Jack Ma, and toured the campus of Harvard University in 2018 with the school’s then-president, Lawrence Bacow.

As Evergrande’s majority shareholder, Hui and his family collected the equivalent of around $7.1 billion in stock dividends from the company over the years, according to regulatory filings. His personal wealth was valued at more than $40 billion by Forbes in 2017.

When investors started becoming nervous about Evergrande’s breakneck growth and its growing liabilities in 2018, Hui made a public show of support for the developer by investing $1 billion in its U.S. dollar bonds that paid up to 13.75% in annual interest.

In 2019, Hui, who had been named a professor at his alma mater, advised on a master’s degree dissertation by a student titled “Research on an Early Warning Model for Financial Risks of Real Estate Companies from a Cash Flow Perspective.” The study concluded that Evergrande had low liquidity risk. Hui sold his international-bond holdings that year and bought more Evergrande dollar bonds in 2020.

The party stopped for Evergrande after Chinese regulators imposed curbs on property developers’ leverage in 2020 in a policy widely known as the “three red lines.” Some banks started to demand early loan repayments, and investors stopped buying its bonds. By mid-2021, Evergrande’s cash crunch had made it unable to pay suppliers of building materials and construction services, and work stopped at hundreds of its property projects.

Evergrande sought government help and in late 2021 turned to officials in Guangdong, the southern Chinese province where it is based, for assistance. It didn’t get a bailout, but the local government dispatched a working group to the developer to help manage its risks and operations. Those actions received support from China’s central bank and other financial regulators.

Chinese authorities let Evergrande default on its international bonds, betting that the fallout could be contained and that its business could be slowly dismantled.

Hui continued to lead the developer and worked on its offshore-debt restructuring plan. He made constant promises through much of 2022 to complete the construction of homes and deliver them to buyers.

State-owned enterprises took on some of Evergrande’s assets and a local government in its home province let the developer back out of a big contract to build what would have been the world’s largest soccer stadium. Those actions helped shave off some of Evergrande’s liabilities, which topped the equivalent of $300 billion.

What regulators didn’t foresee was how Evergrande’s problems would continue to mount and how its finances were far more tangled than was publicly known. Banks last year seized $2 billion in cash at Evergrande’s property-services unit, revealing convoluted lending arrangements that the company hadn’t disclosed previously. Evergrande and its subsidiaries had also raised around $13 billion by selling wealth-management products that weren’t recorded on its balance sheet.

In the summer of 2022, groups of home buyers around the country who were frustrated at the slow progress of construction at apartments purchased from Evergrande and other troubled developers began protesting online and threatened to walk away from their mortgages. Chinese authorities managed to quell the discontent but it showed what was at stake if Evergrande didn’t fulfill its promise to finish homes.

In quarterly updates that ran through September 2022, Evergrande said it had over 700 pre-sold but unfinished projects, of which 668 had resumed construction. Hui oversaw numerous internal company meetings and said Evergrande was working round the clock to deliver homes and pay off its debts. By the end of last year, the company said it delivered a total of 301,000 apartments.

Some Chinese citizens who took ownership of their homes from Evergrande complained on social media that their apartments were still unfinished, and lacked painted walls or flooring that they had paid for. Others said they are still waiting for their units to be completed, as construction has ground to a halt or made slow progress.

Evergrande also struggled to repay holders of its wealth-management products after coming up with a plan to pay them the equivalent of $1,100 a month. That amount was cut to $275 last November before the payments were stopped entirely in August. It still owed investors the equivalent of $4.7 billion as of the end of 2022.

The company’s debt restructuring plan, which was unveiled in March but ultimately blocked by Chinese regulators, involved swapping its defaulted bonds with new securities, which would also have benefited Hui as one of the company’s offshore creditors.

“The government doesn’t have an incentive to make Evergrande disappear tomorrow, because it will be a huge loss for the confidence of investors overall in a market where the demand is still weak,” said Gianfranco Siciliano, a professor at China Europe International Business School.

“The future is very blurred, very uncertain,” given what happened to Hui, he said. But it is clearer now than “before that the company is probably not going to survive.”

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