German Chancellor Friedrich Merz demanded a massive overhaul of the European Union’s outdated budget system on Thursday. He wants leaders to stop handing out old subsidies and start spending real money on military defense. Merz also stated the continent must invest heavily to make European businesses more competitive on the global stage.
His strong speech shows the growing political fight over the upcoming 2028 to 2034 financial plan. The European Parliament voted in April to increase total spending well beyond the original limits proposed last year. However, national governments strongly oppose this idea because they refuse to force their citizens to pay higher taxes to fund the difference.
Merz delivered his remarks during the Charlemagne Prize award ceremony in the German city of Aachen. This year, the prestigious award went to Mario Draghi, the former chief of the European Central Bank. Draghi made headlines in 2024 when he issued a harsh warning about the rapidly fading global competitiveness of the European market.
Greek Prime Minister Kyriakos Mitsotakis also attended the high-profile ceremony. His country suffered massive financial pain during the historic eurozone debt crisis. During that dark period, Draghi famously promised to do whatever it takes to save the shared currency. Merz honored that legacy, telling the crowd that a sovereign Europe desperately needs a Draghi-proofed budget right now.
The German leader explained that resources remain incredibly tight across the continent. Because money is scarce, he urged lawmakers to create streamlined structures and focus exclusively on European funds for European policies. He believes leaders must prioritize investments that actively protect citizens and build stronger tech companies.
Currently, the European Union spends its money on very old priorities. Merz pointed out that more than 66 percent of the massive budget goes directly toward traditional farming subsidies and regional development aid. He wants to rip up that old playbook and redirect billions of euros toward modern military readiness and advanced technology.
Merz highlighted a terrifying fact about current spending habits. He noted that several European countries currently spend more on interest payments on their old national debt than on their own military defense. He argued that this financial imbalance leaves the entire continent completely vulnerable to outside threats.
Finding the cash to fix these problems causes deep arguments between neighboring countries. Back in February, French President Emmanuel Macron proposed a radical idea. Macron wanted the European Union to borrow money together as a single group. He argued that joint borrowing would help Europe match the massive government spending seen in the United States and China.
Merz flatly rejected the French proposal on Thursday. He stated clearly that Germany cannot follow that path and will not agree to take on new joint European debt. The chancellor explained that strict German constitutional laws prevent the country from borrowing money solely to finance routine day-to-day spending. He also opposed new taxes on tobacco products and large corporate profits.
The chancellor warned the audience that excessive national debt destroys sovereignty and severely limits a government’s ability to act during a crisis. He told the crowd firmly that leaders absolutely cannot meet the tough challenges of the 21st century with an outdated 20th-century budget. He demanded fundamental modernization before the next financial cycle begins in 2028.
