Headlines
Germany's Merz does not rule out EU defence borrowing
Published by Global Banking & Finance Review®
Posted on May 9, 2025
3 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on May 9, 2025
3 min readLast updated: January 23, 2026
Friedrich Merz, German chancellor, is open to EU defence borrowing under exceptional circumstances, amid concerns over rising global debt.
By Andrew Gray and Thomas Escritt
BRUSSELS (Reuters) - Friedrich Merz did not rule out common European Union borrowing for defence on Friday during his first trip to Brussels as German chancellor, but said it could only be for exceptional circumstances and that he was worried about rising global debt.
Fiscally prudent Germany, the EU's largest economy, has traditionally rejected common borrowing, with the exception of the COVID pandemic when it was used to fund recovery projects.
But increasing Russian hostility towards Europe in the wake of the invasion of Ukraine, and fears that the U.S. might not to come to the aid of NATO allies, have bolstered calls for Berlin to make another exception to bolster regional security.
Merz, who took office on Tuesday, told a joint news conference with European Commission President Ursula von der Leyen that he did not want to preempt conversations in his government and the EU over different financing options.
When asked about common debt, he repeated the German mantra that the guiding principle must remain that the EU should only take on debt in exceptional circumstances, without saying whether he thought the current situation 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 said.
"We are looking for ways to finance this."
Merz said on the eve of Germany's federal election that Europe needed to become independent from the United States when it came to security.
Before taking office, he pushed a historic fiscal package through parliament that would allow his government to drastically hike national defence spending, suggesting he would take a more assertive stance on defence than his predecessor.
Merz is also a conservative who has long advocated fiscal rectitude. He said on Friday he was "worried about the constantly rising national debt around the world - not just in Europe, but also, for example, in the United States".
"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," he added.
German debt is just above 60% of GDP - half of the level of the United States and two thirds the euro zone average.
(Reporting by Andrew Gray in Brussels, Thomas Escritt and Miranda Murray in Berlin; Writing by Sarah Marsh; Editing by Andrew Heavens)
The main topic is Friedrich Merz's openness to EU defence borrowing under exceptional circumstances, focusing on security and debt concerns.
EU defence borrowing is being considered due to increased Russian hostility and the need for European security independence.
Merz is worried about the rising national debt worldwide and questions the sustainability of refinancing and interest payments.
Explore more articles in the Headlines category
