German Chancellor Friedrich Merz Talks Security in Europe

Friedrich Merz · Federal Government of Germany

Europe needs an integrated capital market so its capital stays in Europe instead of flowing to New York.

Europe is a large market of about 450 million consumers, 100 million more than the US, and European savings are partly funding US growth, including investment and US Treasury purchases. Merz says the money can stay in Europe only if Europe builds a real integrated capital market, a goal debated for decades that the EU is now working on at the European level. He cites German IPOs going to New York and NASDAQ as a trend he does not want to continue. He says the capital markets are waiting for reform and that Europe is doing its homework, with a reversal expected within the next couple of years.

“The answer is yes, provided we are creating a real integrated capital market in Europe. ... For example, IPOs go to New York and to the NASDAQ there from Germany. This is not what I would like to see in the upcoming future.”at 4:54

Friedrich Merz · Federal Government of Germany

Germany leaving the euro would collapse the monetary union and hurt Germany most, so Germany must stay.

Merz responds to AfD polling well and talk of leaving the euro by saying that Germany is an anchor of the monetary union. He argues that if Germany left, the monetary union itself would collapse, but Germany would take the biggest damage because it relies on and benefits most from European integration. He backs this with the point that the German economy is the most export-oriented in the EU, so losing the EU as its export base would badly damage German industry.

“If Germany would leave the monetary union, the monetary union for itself would collapse, but the biggest damage would come to Germany because we are really relying and benefiting from this European integration.”at 9:33

Friedrich Merz · Federal Government of Germany

Europeans, not the US, now fund Ukraine's weapons; NATO defence spending rising toward 5% of GDP.

Merz argues Europe can defend itself without the US. Since the start of last year, a coalition of Europeans and non-European partners, but not the US, has paid for Ukraine's weapons and equipment, and he says this shows Europe can act on its own, though it is a big strain on budgets. At the Hague NATO summit, European members agreed to pay up to 3.5% of GDP on defence, and he says Germany is now spending up to 5% of GDP. He describes the European pillar of NATO as needing to become much stronger.

“Since the beginning of last year, the coalition of the willing combined out of Europeans and many non European partners, but not The US, are paying for Ukraine.”at 11:48

Friedrich Merz · Federal Government of Germany

EU wants no trade war with China; offers tariff-free access if fair trade, citing overcapacity and subsidies.

Merz says the EU does not want a trade war with China. At a closed-door Brussels meeting, all 27 EU leaders agreed that the bloc must respond to global imbalances, including overcapacity, subsidies and undervalued currencies. The EU's offer is tariff-free access to one of the world's biggest markets, but only under the condition of fair trade. He points to China's willingness to accept a limited number of car imports into the EU as a first sign the approach may be working.

“We don't want a trade war with China. ... We are offering something which is the tariff free access to one of the biggest markets in the world, but this is under preconditions and the precondition is fair trade.”at 17:46

Friedrich Merz · Federal Government of Germany

Germany's car industry can compete with subsidized Chinese EVs, but must transform itself on its own.

Asked whether German carmakers can counter a flood of subsidized Chinese EVs, Merz says the answer depends on the framework and political conditions, which the government is now redrawing. He says Germany and France agreed on Friday on combustion engines, opening the way for a common European position. He is confident the industry has the potential to compete, but says a big transformation is under way that companies must carry out themselves, while government provides the framework and political opportunities.

“Yes, I'm sure that we have the potential, but there is a big transformation happening in the industry and that is something they have to do on their own. ... but the companies have to do their own homework.”at 19:40

Friedrich Merz · Federal Government of Germany

Russia aims to destabilise Europe's political order, a threat Germans underestimate.

Merz says his biggest concern is the underestimated Russian impact on European societies. He argues that Russia's aim goes beyond territorial gain in Ukraine: Moscow fears democracy, open societies and the success of European integration, and wants to undermine that success. He says Russia is on the way to destabilising the political order of the continent, and that many Germans underestimate this threat, which he calls real every day.

“Fundamentally, my biggest concern is the underestimated Russian impact on our societies... The big picture is that Russia is on the way to destabilize the entire political order of our European continent.”at 20:08