This paper from the German Marshall Fund of the United States looks at Germany’s evolving relationship with the European Union. Growing in stature and, at the same time, sacrificing some of its own interests for the European Union, Germany has guaranteed its fundamental interest: a peaceful co-existence with its neighbours. In the meantime, Germany was also the only state to possess a foreign policy outlook that was both pro-European and transatlantic. However, under the administration of Chancellor Schröder, the tone and substance of Germany's European Policy evolved in two ways. First, within Europe, the "national" or the "German" component was accentuated. Second, during the war in Iraq, Germany made a break with its traditional foreign policy when it stood by France in opposing the United States. The paper explores how this new German orientation will develop during the German presidency of the EU during the first six months of 2007.