Friedrich Merz, the new Federal Chancellor of Germany, has transmitted an unambiguous message to his first visit to Brussels since his entry into office.
“This cannot become the rule that we go into debt at the EU level,” he said.
In distinct press conferences with Ursula von der Leyen, president of the European Commission, and António Costa, president of the European Council, the German chief left no doubt about his opinion on the issuance of the debt shared by the 27 Member States, as the block did in 2020 to set up the recovery fund of 750 billion euros.
Since this revolutionary experience, an increasing group of countries has raised the idea of repeating the model to collect funds for the myriad of challenges that Europe is confronted today, including the gradual loss of competitiveness, the fight against climate change, the elimination of Russian fuels and, more recently, the rise in military spending.
At the beginning of March, Von der Leyen unveiled the plan “Readiness 2030” to invest for 800 billion euros By rearming the EU and strengthening deterrence. The plan includes 150 billion euros in low interest loans, which will only be reimbursed by the Member States that require them. The rest of the money is supposed to be collected thanks to the temporary relaxation of budgetary rules and new initiatives with the private sector.
Friday, Merz defended the need to use financial markets to stimulate military spending, but warned the extension of the approach to other political areas. Before taking office, the conservative chief wall A constitutional amendment to exempt the defense and security of expenses greater than 1% of the GDP of the so-called “debt braking” in Germany.
“We are faced with crises and challenges around the world which become more permanent, and which cannot be used as the basis of the common permanent common debt,” said the Chancellor, speaking next to Costa.
Later, with Von Der Leyen, he echoes his previous message.
“There may be exceptional circumstances, as during the cocovid pandemic. And another situation in which we are currently being to store our defense capacities,” he said. “But that should remain an exception for the European Union to go into debt.”
Merz also expressed his concerns about the burden that continuous public spending would put on Member States, some of which already exceed the 100%GDP debt ratio.
“I wonder to what extent refinancing, not only of debt but also interest rates, will be possible. We cannot enter into end-of-debt spirals,” he said.
“What we have to do is look for joint solutions, but it's not just a matter of money. It is also a question of efficiency,” he added, calling for regulatory simplification, standardization and economies of scale as alternative methods.
The debt around the debt will start at full speed when the commission reveals its proposal to EU budget 2028-2032, which will introduce a brand new envelope to repay the accumulated debt of the COVVID recovery fund. Refund are estimated Be significantly, ranging from 13 billion euros to 15 billion euros per year until 2058.
The presentation of the commission, expected before the end of this year, will trigger a prolonged, complex and likely debate of the Member States.
Spain, for example, has tabled an ambitious proposal to increase the block budget by 1.2 euros of euros current to 2 billions of euros, using common debt as a tool. Meanwhile, Baltic States, Poland and Greece have called for subsidies to finance defense expenses. Unlike loans designed by von der Leyen, such subsidies would be reimbursed collectively.
ADVERTISEMENTFinland and Denmark, two traditionally frugal nations, have changed speed to adopt a more flexible position, arguing that the aggressive posture of Russia deserves a new way of thinking. On the other hand, the Netherlands insist on its longtime red line: no more common debt.
The square of the circle will only be possible once Germany and France, the largest EU economies, arrive on common ground. Paris has often called for innovative solutions to the EU budget, even if it struggles To curb its balloon debt levels.
“It will be a difficult discussion. There will be differences in opinion,” admitted Merz. “There is not always an agreement between Germany and France, but we sit down and talk about these subjects.”
Merz's visit to Brussels coincided with Europe Day.
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