(de-news.net) – Chancellor Friedrich Merz defended the coalition’s reform agenda on the first day of the parliamentary budget debate. Pensions, economic reforms, EU spending, aid to Ukraine, defense, and diplomacy are all at issue, and business executives are cautioning against retreating from structural change.
In the Bundestag, Chancellor Friedrich Merz reiterated that the CDU/CSU-SPD coalition intended to proceed with its reform agenda, arguing that Germany needed to restore sustainable economic growth. He defended the central objective of the planned pension reform: enabling younger generations to build greater wealth while protecting people who had contributed to the pension system for 45 years. Although Merz acknowledged that the pension proposals still required further discussion, he emphasized that their underlying direction should be maintained. He also acknowledged that the government had so far failed to explain the purpose and significance of its reforms effectively enough, making clearer communication a central responsibility for the coalition as it seeks to implement its plans.
The debate has taken on additional political significance since the AfD’s victory in Saxony-Anhalt prompted members of the coalition to question some of the previously agreed reforms. Merz responded by sharply attacking the AfD over its position on Russia and characterizing the party as a destructive political force. He argued that fundamental differences separated the Union and AfD on foreign policy, European policy, social policy and questions of peace. Referring to the state election, Merz also stressed that the AfD had failed to secure an absolute majority and maintained that its political strategy could not achieve a majority anywhere in Germany.
Meanwhile, Merz has renewed his demand for substantial reductions to the European Union’s next long-term budget, bringing the dispute over fiscal priorities to the European level. Following talks in Berlin with European Council President António Costa, he argued that the European Commission’s proposal, which would expand the financial framework by 60 percent, was incompatible with a period of fiscal restraint. The proposed framework for 2028–2034 totals about 1.76 trillion euros, a level Merz and the leaders of Austria, Sweden, Denmark, Finland and the Netherlands consider excessive. Merz called for several hundred billion euros to be removed from the proposal and maintained that reductions would need to affect all areas of spending.
The scale of the proposed EU budget has therefore become linked to a broader argument over how the bloc should set priorities while strengthening its capacity to act. Merz warned that excessive borrowing could undermine the European Union’s sovereignty and ability to act, making difficult structural reforms and clearer prioritization necessary. In his view, those changes are required to reinforce Europe’s competitiveness as well as its defense capabilities. Representatives of Austria, Sweden, Denmark, Finland and the Netherlands were invited to Berlin to discuss the financing issue. Together, the five countries account for 40 percent of the EU budget and 70 percent of bilateral aid to Ukraine, giving their governments a significant stake in negotiations over the bloc’s future financial framework.
Spending tests balance between diplomacy and security
Following his party’s defeat in Saxony-Anhalt, CDU/CSU parliamentary leader Thorsten Frei has likewise reaffirmed his support for the government’s reform agenda. He argued that the coalition now needed both clarity and unity to implement compromises that had already been reached. In his assessment, the credibility of those agreements with the public would suffer if they were abandoned too readily, particularly because the government was pursuing what he described as the largest reforms in decades. Frei presented the planned pension reform as a carefully balanced compromise whose individual components could not simply be separated or selectively removed without affecting the overall package.
The planned 12 billion euros in aid for Ukraine was supported by CDU foreign policy expert Norbert Röttgen, who argued that an attempted attack at Leipzig/Halle Airport demonstrated a new level of Russian aggression. He also accused the AfD of aligning itself with forces hostile to Germany, reinforcing the broader dispute over the party’s position on Russia and the war in Ukraine. SPD lawmaker Katrin Dilcher acknowledged that she would favor greater funding for humanitarian assistance around the world. At the same time, she emphasized that Germany and its partners should not wait until crises had reached their own borders before responding.
The competing priorities are also visible in the distribution of funds between diplomacy and defense. AfD budget policy expert Marcus Kögel contrasted the approximately 6 billion euros allocated to diplomacy with a defense budget approaching 110 billion euros. He argued against Germany becoming accustomed to preparing for war.
Green lawmaker Anja Schäfer criticized the draft budget for failing to maintain an adequate balance between foreign policy and defense capabilities. The Foreign Office is expected to receive 5.9 billion euros next year, approximately 68 million euros less than in the current year. The figures have become part of a broader confrontation between the government and opposition over the country’s strategic and fiscal priorities during the Bundestag’s general debate.
Marcel Fratzscher, president of the German Institute for Economic Research, has meanwhile cautioned the government against retreating from its reform program. He argued that election results should not lead policymakers to conclude that voters could no longer be asked to accept necessary changes. Fratzscher expressed concern that reforms already announced could instead be postponed or abandoned following the political pressure generated by recent election results. Such a retreat, he warned, could aggravate existing economic difficulties and cost jobs. Business associations have voiced similar concerns, adding an economic dimension to the political debate over whether the coalition will maintain its reform course despite the electoral and internal pressures now confronting it.
