German Chancellor Friedrich Merz has called for a sweeping overhaul of what he described as the European Union’s outdated budget system, backing a streamlined approach that would prioritise investment in defence and the bloc’s economic competitiveness.
Merz made the appeal at a ceremony in Aachen awarding the 2026 Charlemagne Prize to Mario Draghi, the former European Central Bank president and Italian prime minister, whose recent report on EU competitiveness has framed much of the debate.
The chancellor’s remarks set the stage for a contentious negotiation over the EU’s next multi-year budget, with member states divided over how much spending should be redirected toward security.
Merz also addressed the war in Ukraine, saying Europe would decide for itself who should mediate any negotiations with Russia. "We Europeans decide for ourselves who speaks on our behalf. No one else," he said, rejecting a proposal to involve former chancellor Gerhard Schroeder.
The interventions came against a difficult domestic backdrop. A survey by the INSA institute found that 55% of Germans expect Merz’s coalition, formed just over a year ago, to collapse before the end of its term.
Merz’s personal approval rating fell to a record low of 13% in May, underscoring the political pressure on a government that has staked much of its agenda on rearmament and European reform.