BERLIN — German Chancellor Friedrich Merz on Thursday poured cold water on two of the European Commission’s proposals for new revenue streams in the EU’s next long-term budget.
In its plan, presented Wednesday, the Commission proposed an EU tax on high-turnover companies and a €400 billion crisis fund, potentially to be financed via joint borrowing. The plan fired the starting gun for what will be two years of haggling between the EU executive, national capitals and the European Parliament, all of which must agree before the spending plan can be approved.
“There is no question of the European Union taxing companies, as the European Union has no legal basis for this,” Merz said during a joint press conference with British Prime Minister Keir Starmer in London. “I can rule out the possibility of Germany going down this route. We are not doing that.”
The EU is also becoming too reliant on joint debt, the chancellor said, explaining it’s “permissible as an exception” but has become “the new normal.”
Germany, which has long been fiercely resistant to EU borrowing underpinned by all 27 governments collectively — as much as anything, because it would mean Berlin would end up on the hook for debts run up by more spend-friendly countries — did back down at the height of the Covid-19 pandemic to allow it as a one-off to fund the economic recovery.
Commission officials this week suggested that the proposed permanent EU crisis fund could be financed in the same way. But Germany’s renewed opposition again looks to be insurmountable.
“The European Union must basically make do with the money it has available,” the conservative leader said. “That is why there will be a pretty tough struggle over the next two years.”
The Commission proposed a central EU budget of €1.816 trillion for the seven-year period from 2028. That figure would represent a major increase in the EU’s spending power compared with the current budget that has run since 2021.
To finance that spending, the EU executive presented three new taxes targeting electric waste, tobacco products and high-turnover companies to repay the post-Covid debt, which is estimated to cost €25 to €30 billion per year.
But Merz has repeatedly emphasized that, from Berlin’s point of view, EU spending must become more efficient instead of increasing the overall pot of cash.
The leader of the EU’s biggest economy did, however, congratulate Commission President Ursula von der Leyen on one aspect of her budget proposal.
“The proposal that is now on the table is good in one respect, namely that the proportions between the individual expenditures will be rebalanced,” he said in view of higher defense spending.
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