German Chancellor Friedrich Merz indicated a potential shift in Germany’s stance on common European Union borrowing for defence during his first official visit to Brussels on Friday. While stressing that such borrowing should be reserved for exceptional circumstances, he acknowledged the need to explore financing options for bolstering the EU’s defence capabilities.
Germany, traditionally fiscally conservative and the EU’s largest economy, has historically opposed common borrowing, with the notable exception of the COVID-19 pandemic recovery fund.
However, Russia’s increased aggression towards Europe following the invasion of Ukraine, coupled with concerns about the reliability of future U.S. support for NATO allies, have intensified calls for Germany to reconsider its position and invest in regional security.
Speaking at a joint press conference with European Commission President Ursula von der Leyen, Merz emphasized that he did not want to prejudge ongoing discussions within his government and the EU regarding various financing mechanisms.
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When questioned about common debt, he reiterated Germany’s long-held principle that the EU should only incur debt in exceptional situations. He stopped short of explicitly stating whether he believed the current geopolitical climate qualified as such.
“We had the exceptional situation of the coronavirus pandemic, and now we face a new major challenge: the establishment – or re-establishment – of the European Union’s defence capability,” Merz stated. “We are looking for ways to finance this.”
Merz had previously advocated for greater European independence from the United States on security matters. Before assuming office, he spearheaded a significant fiscal package through parliament, enabling his government to substantially increase national defence spending, suggesting a more proactive approach to defence compared to his predecessor.
Despite this shift, Merz, a conservative known for his commitment to fiscal responsibility, expressed concerns about rising global debt levels. “I am worried about the constantly rising national debt around the world – not just in Europe, but also, for example, in the United States,” he said. “And I do wonder how long it will be possible not only to refinance the debt itself but also to finance the interest payments. We cannot keep taking on debt indefinitely.”
Germany’s debt-to-GDP ratio is currently just above 60%, significantly lower than that of the United States and the Eurozone average.
