By Christian Kraemer and Matthias Williams
BERLIN, May 14 (Reuters) – German Chancellor Friedrich Merz on Thursday called for a revamp of what he cast as the European Union’s outdated budget system, backing a streamlined approach that prioritised investing in defence and making the bloc more competitive.
The speech showed how battle lines were being drawn over the 2028-2034 EU budget, where calls for increased security spending vie for funds with more traditional recipients such as farming subsidies and regional development aid.
The European Parliament, which co-decides with EU governments on spending plans, in April voted to raise the budget beyond what the European Commission proposed last year, setting up a showdown with member states reluctant to pay more.
Merz made the remarks at the award ceremony for the Charlemagne Prize in the city of Aachen, which this year went to former European Central Bank Chief Mario Draghi, who issued a storm-warning in 2024 about the EU’s fading competitiveness.
Also at the ceremony was Prime Minister Kyriakos Mitsotakis of Greece, whose country bore the brunt of the euro zone debt crisis when Draghi, as ECB chief, delivered his famous promise to do “whatever it takes” to save the euro.
“A sovereign Europe needs a ‘Draghi-proofed’ budget,” Merz said.
“Streamlined structures, investments in competitiveness and defence, a focus on European funds for European policies – all of this is necessary because resources are limited.”
MERZ SAYS MODERNISATION IS ESSENTIAL
French President Emmanuel Macron had in February called for joint borrowing to keep pace with the U.S. and China, but Berlin opposes the idea. It also opposed other Commission proposals such as levies on tobacco and on large companies’ turnover.
“Some believe we can evade this painful task by taking on new debt — European debt — by financing regular spending through debt. Germany cannot follow this path, if only for constitutional reasons,” Merz said.
At the moment, more than two-thirds of the EU budget was directed towards subsidies, Merz said, while some countries were spending more money on servicing their debt than on defence.
“But we cannot meet the challenges of the 21st century with a 20th-century budget. Fundamental modernisation is therefore essential,” he said.
“Moreover, the reality is that excessive debt threatens sovereignty and limits our ability to act.”
(Writing by Matthias Williams; Editing by Alison Williams)
Copyright 2026 Thomson Reuters.
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