Friedrich Merz’s three-month bid to catapult Germany into the role of undisputed leader of Europe has come unstuck.
His call for Europe to hand Ukraine access to €201bn (£176bn) in frozen Russian central bank assets via a reparations loan was rejected at a decisive European Council meeting in Brussels.
Instead, Ukraine is to be given a €90bn interest-free loan, backed by the EU’s collective budget, covering two-thirds of what Ukraine will need between 2026-27. Merz had been unable to break the resistance of Belgium, which said the raid on the Russian funds, stored mainly in Brussels-based Euroclear, was unlawful. Opposition had also come from France and Italy, who both insisted they would not cover the cost of indemnifying Belgium against legal claims.
Going into the summit, Merz had insisted using the Russian assets was the only option, and the defining test of Europe’s ability to act decisively in its own interest. His strong advocacy of using the Russian assets had been a remarkable personal volte-face. As recently as August, he said he feared the measure might discourage other central banks from holding euro-denominated assets.
He switched sides in a Financial Times article in September, saying something dramatic was needed to upset Putin’s calculations. France reluctantly appeared to follow suit. Earlier this month Merz flew at short notice to Brussels to try personally to persuade the Flemish nationalist prime minister, Bart De Wever, to end his resistance, to no avail.
Despite the reverse, it seems unlikely Merz will back away from the role he sees Germany as required to fulfil, or revert to being the meek partner in an archaic Franco-German motor.
A self-confessed disillusioned Atlanticist, Merz is convinced by two principles: that Europe’s security is inextricably allied with Ukraine’s, and that something fundamental has changed in the transatlantic relationship. Last week he quoted, somewhat self-consciously, from the German sociologist Max Weber’s 1919 essay titled Politics as a Vocation, describing the feeling of holding “in one’s hands a nerve fibre of historically important events”.
He went on to say that current relations with the US were “not normal fluctuations, the ups and downs of sometimes good, sometimes bad relations. This is not a variation in circumstances – it is a tectonic shift in the centres of political and economic power in the world.”
Despite the setbacks, Merz has achieved major objectives by ensuring Europe retains stewardship of the Russian assets and securing a commitment they will not be released until Russia pays reparations, possibly by repaying the loan to the EU.
This means Europe retains a stake at the Ukraine bargaining table. The US effort to grab the assets in a carve-up with Russia was seen as indefensible by some German diplomats.
Merz himself explained he saw “no possibility of leaving the money we mobilise to the US”. Writing earlier this month in the German newspaper Frankfurter Allgemeine Zeitung, he said: “It is up to us to advance the cause of European sovereignty. If we are serious about this, we cannot leave it to non-European states to decide what happens to the financial resources of an aggressor state that have been lawfully frozen within the jurisdiction of our own rule of law and in our own currency.”
The chancellor can also credit himself with persuading the US negotiators Steve Witkoff and Jared Kushner to come to Berlin for two days of talks this week to revise a potential peace agreement, including clearer US security guarantees. In Berlin, Merz made the symbolic choice to sit down next to Ukraine’s president, Volodymyr Zelenskyy, and across the table from Witkoff and Kushner. No other European leader was there, although the French president, Emmanuel Macron, the UK prime minister, Keir Starmer, and others attended a post-talks dinner.
More broadly, Merz has also given the most uncompromising response of any European leader to the claims in the US national security strategy about Europe’s decline. Where Starmer has shunned confrontation, Merz, during a visit to Rhineland-Palatinate, the German region that hosts major American military bases, said: “I see no need for the Americans to now want to save democracy in Europe. If it were to be saved, we could do it ourselves.”
In a speech to the CSU party last weekend he openly clashed with Trump’s benign assessment of the threat posed by Russia. “Just as in 1938 the Sudetenland was not enough, Putin will not stop. And those who still believe today that he has had enough should closely analyse his strategies, documents, speeches and public appearances.” He said “the era of Pax Americana was over”, and there was no point being nostalgic for something that would not return.
Finally, in a speech to the Bundestag on Wednesday, Merz insisted Germany had to reform in the face of this new world disorder. “We are firmly determined that Germany must not become a victim of these processes. We cannot stand by and watch as the world is reshaped. We are not a pawn of major powers.”
As a sign of Germany’s new-found sense of agency, he confirmed defence spending would rise by up to €378bn by 2029, double the budget of the preceding five years. Merz is also moving forward with a form of military conscription.
Pressed in the Bundestag by the AfD on whether he was considering sending German troops to a European coalition force operating inside Ukraine, Merz said any such decision was for later. But he added: “We will not – at least as long as I am still able to speak – repeat the mistakes of 2014, when we left Ukraine vulnerable to Russian interference without security guarantees.” By contrast, his SPD predecessor Olaf Scholz in March 2024 said: “To be perfectly clear, as German chancellor I will not send any soldiers from our Bundeswehr [armed forces] to Ukraine.”
Merz will face criticism that he bet the farm on a flawed plan, but he won cross-party praise in the Bundestag last week. The SPD foreign policy expert Adis Ahmetovic said: “The chancellor has successfully made Berlin a hub for international diplomacy.”
If it is to remain that hub, he may not only have to confront a confident populist far right in Germany, but also its open ideological allies in Russia and the US. The risk of an all-out row with an irascible Trump or a misreading of his own electorate’s priorities are real.
A YouGov poll commissioned by the German press agency dpa showed broad German support for Russian state bank assets being seized to help Ukraine, but a separate poll showed 45% of Germans wanted the government to scale back support for Ukraine. The AfD, running neck and neck with the CDU nationally, will try to blame Merz for every battlefield reverse.
There is a risk that Merz, consumed by the grandeur of geopolitics, loses touch with what moves most voters. Last week, he said, rather grandly: “One day, we will not be asked, and I say this quite openly and honestly, dear friends, whether we held the safety net in the German pension system for one year less or one year longer.
“The question, rather, will be whether we made our contribution, and indeed the maximum contribution we could make, to preserving freedom and peace in an open society, a market economy in the heart of Europe.”
Noble sentiments, but voters are not renowned for rewarding politicians for statesmanship.
