Merz Excludes Permanent Shared Debt in EU Visit to Brussels

Friedrich Merz, the newly appointed federal chancellor of Germany, delivered a clear message during his initial visit to Brussels since assuming power.

He stated emphatically, ‘It can never be the norm for us to incur debt at the European Union level.’

During distinct press conferences alongside Ursula von der Leyen, who leads the European Commission, and Antonio Costa, head of the European Council, the German chancellor made it abundantly clear where they stand regarding joint borrowing among the 27 EU countries—a strategy employed in 2020 to establish the €750 billion coronavirus rescue package.

Following that pioneering initiative, an increasing number of nations have proposed replicating this approach to address various issues confronting Europe nowadays. These include declining economic competitiveness, efforts to combat climate change, phasing out reliance on Russian energy sources, and most recently, boosting defense expenditures.

In early March, von der Leyen introduced the “Readiness 2030” initiative aimed at investing up to


€800 billion


In revitalizing the EU and enhancing deterrence, the strategy includes €150 billion in low-interest loans. These funds would be repayable solely by those member states that utilize them. Meanwhile, additional financing is expected to come from temporarily easing budgetary constraints and launching fresh collaborations with the private sector.

On Friday, Merz argued for accessing financial markets to increase military spending but cautioned against applying this strategy to other sectors of governance. Prior to assuming his role, the conservative politician


spearheaded


A constitutional modification in Germany to exclude defense and security expenditures exceeding 1% of the country’s GDP from the aforementioned “debt brake.”

“The chancellor stated that we are encountering global crises and challenges which are increasingly turning into persistent issues, and these should not serve as a foundation for enduring collective European debt.” This was mentioned while standing beside Costa.

Subsequently, speaking alongside von der Leyen, he reiterated his previous statement.

Exceptional situations may arise, like those seen during the COVID-19 pandemic. Another scenario we face now involves bolstering our defense resources,” he stated. “However, the European Union should generally avoid taking on additional debt.

Merz likewise expressed worries regarding the strain that ongoing government expenditures could impose on member nations, particularly those whose debts have surpassed the threshold of 100% of their GDP.

“I am curious about how far the refinancing will extend—not only for the debt itself but also for the interest rates. We must avoid getting trapped in perpetual cycles of borrowing,” he stated.

“We should focus on finding collaborative solutions; however, this goes beyond financial matters. Efficiency plays a crucial role too,” he emphasized, advocating for simplified regulations, standardized processes, and larger-scale operations as alternate approaches.

The discussion about debt will intensify as soon as the Commission presents its suggestion for


the EU budget


In 2028-2032, a completely new repayment mechanism will be implemented to settle the outstanding debts accrued from the COVID recovery fund. Payments


are estimated


To be substantial, varying between €13 billion and €15 billion annually up till 2058.

The commission’s unveiling, anticipated by the end of this year, is set to ignite an extensive, intricate, and probably contentious discussion amongst the member countries.

For instance, Spain has proposed increasing the EU’s budget from its present level of €1.2 trillion to €2 trillion through the use of shared debt. In contrast, countries like Lithuania, Latvia, Estonia, Poland, and Greece advocate for grants aimed at funding defense expenditures. These grants differ from those suggested by Von Der Leyen because they would be repaid jointly rather than individually.

Finland and Denmark, which have historically been known for their thriftiness, have now adopted a more adaptable stance. They contend that Russia’s assertive behavior calls for a fresh approach. In stark opposition, the Netherlands remains steadfast in its longstanding principle of rejecting shared debt.

Solving the problem of squaring the circle will occur only when Germany and France, the EU’s biggest economic powers, reach an agreement. Paris has frequently advocated for novel approaches to the EU budget, despite


it struggles


To control its rapidly increasing debt levels.

It’s bound to be a challenging conversation. We’ll likely have differing viewpoints,” Merz acknowledged. “Germany and France don’t always see eye to eye, but we’re taking the time to sit down and discuss these issues.

Merz’s trip to Brussels took place during Europe Day.