German Chancellor Friedrich Merz has called for a significant revamp of the European Union’s budget system, criticising its outdated structure and advocating a streamlined approach prioritising defence spending and enhanced bloc competitiveness. Speaking at the Charlemagne Prize ceremony in Aachen, where former European Central Bank Chief Mario Draghi was honoured, Merz underscored the emerging battle lines for the 2028-2034 EU budget. His remarks highlight a growing contention between calls for increased security expenditure and traditional allocations like farming subsidies and regional development aid. This stance sets the stage for a potential showdown with the European Parliament, which has already voted to raise the budget beyond the European Commission’s initial proposal, and member states reluctant to contribute more.
Merz articulated his vision for a “Draghi-proofed” budget, emphasising the necessity of streamlined structures and targeted investments due to limited resources. He pointed out that currently, over two-thirds of the EU budget is directed towards subsidies, with some nations spending more on debt servicing than on defence. The Chancellor argued that the challenges of the 21st century cannot be met with a 20th-century budget, making fundamental modernisation essential. He also warned that excessive debt imperils sovereignty and limits the Union’s capacity for action.
However, Germany stands firm against proposals for joint borrowing, such as that put forward by French President Emmanuel Macron in February, aimed at matching the economic might of the U.S. and China. Merz explicitly stated that Berlin cannot follow a path of financing regular spending through new European debt, citing constitutional reasons. Furthermore, Germany has expressed opposition to other Commission proposals, including new levies on tobacco and large companies’ turnover, reinforcing its commitment to fiscal prudence within the bloc’s financial framework.
