Friedrich Merz, the new Federal Chancellor of Germany, brought an unequivocal message on his first visit to Brussels since he assumed the position.
“It cannot become a rule in debt to us at the EU level,” he said.
In the separated press conferences with Ursula von der Leyen, president of the European Commission, and António Costa, the European President, the German leader left no doubt about his opinion about the issuance of the debt shared by the 27 Member States, as the block did in 2020 to create the COVID-19 recovery fund of 750 billion euros.
From this pioneer experience, a growing group of countries has raised the idea of repeating the model to raise funds to the myriad of European challenges today, including the gradual loss of competitiveness, the fight against climate change, the progressive elimination of Russian energy fuels and, more recently, increased military expenses.
At the beginning of March, von der Leyen revealed the “Ready 2030” plan, which provides an investment 800 billion euros EU re -rears and reinforcement of deterrent capacity. The plan involves 150 billion euros in low interest loans, which will be reimbursed only by the Member States that request them. The rest of the money must be obtained through the temporary flexibility of fiscal rules and new initiatives with the private sector.
This Friday, Merz defended the need to resort to financial markets to increase military expenses, but warned against the extension of the approach to other political domains. Before assuming the position, the conservative leader directed a constitutional amendment to exempt defense and security expenses for more than 1% of the “debt brake” called in Germany.
“We face crises and challenges worldwide that are becoming more permanent and cannot be used as a basis for a permanent common European debt,” said the chancellor, along with Costa.
Later, with von der Leyen, he echoed his previous message.
“There may be exceptional circumstances, such as during the Covid Pandemia. And another situation in which we are currently finding ourselves is the reinforcement of our defense capabilities,” he said. “But it must continue to be an exception for the European Union to straighten.”
Merz also expressed concern regarding the weight that the continuation of public spending can have in the Member States, some of which already exceed 100% of the debt in relation to GDP.
“I wonder to what extent the refinancing, not only of the debt but also of the interest rates, it will be possible. We cannot go into spirals of endless debt,” he said.
“What we have to do is find joint solutions, but it is not just a matter of money. It is also a matter of efficiency,” he added, appealing to regulatory simplification, standardization and economies at scale as alternative methods.
The debate on the debt will begin at all steam when the commission presents its proposal for the EU Budget 2028-2032, which will introduce a new money to pay the accumulated debt of the Covid Recovery Fund. Dear that Refunds are considerable, ranging from 13 billion euros per year by 2058.
The presentation of the Committee, scheduled for the end of this year, will trigger a prolonged, complex and probably explosive debate between the Member States.
Spain, for example, presented an ambitious proposal to increase the budget of the current block of 1,200 million euros to 2 billion euros, using common debt as an instrument. However, Baltic states, Poland and Greece have requested subsidies to finance defense expenses. Unlike loans conceived by von der Leyen, these subsidies would be paid collectively.
ADVERTISINGFinland and Denmark, two traditionally frugal nations, have changed the speed to adopt a more flexible position, arguing that Russia’s aggressive position deserves a new way of thinking. On the other hand, the Netherlands insist on their long red line: no more ordinary debt.
Circle Square will only be possible when Germany and France, EU’s greatest economies, reach a consensus. Paris has often appealed to the innovative budgetary solutions of the EU while striving to contain the increase in its debt.
“It will be a difficult discussion. There will be differences of opinion,” Merz admitted. “There is not always an agreement between Germany and France, but sit and talk about these issues.”
Merz’s visit to Brussels coincided with Europe.
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