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Chancellor Merz rejects US ‘tyranny’ claims, asserts German democratic stability

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Germany’s new Chancellor from the Christian Democratic Union (CDU), Friedrich Merz, in an interview published in the newspaper Die Zeit on May 15, 2025, evaluated his first week in office and delivered important messages on domestic and foreign policy.

Merz stated that his election as chancellor in the second round did not pose a problem for his actions, saying, “The coalition has a stable parliamentary majority.”

Making a swift start to his chancellorship, Merz first visited Paris and Warsaw.

The new Chancellor announced that he had a telephone conversation with US President Donald Trump.

Merz reported that Trump congratulated him and invited him to the White House. When Trump mentioned that his family came from Kallstadt, near Bad Dürkheim, Merz said he responded, “I also served in an artillery unit near there. I invite you,” and noted that Trump found this idea wonderful.

Stating that the Ukraine issue was also discussed, Merz conveyed that he told Trump he would be going to Kyiv the next day with French President Emmanuel Macron, Polish Prime Minister Donald Tusk, and British Prime Minister Keir Starmer, and that they should try to remain together within the transatlantic alliance and do everything jointly.

Merz indicated that Trump gave him assurances on this matter. To a question about Trump’s call for the Ukrainian President to negotiate and the short half-life of his words, Merz replied, “There are different negotiating styles in international politics, and I can handle them well.”

Merz added, “We are currently experiencing an awakening of Europe. We are doing this for ourselves, not against a third party.”

Recalling Angela Merkel’s 2017 statement in Munich, “We must take our destiny into our own hands,” Merz noted that there had been no significant developments following those words for a long time.

‘We don’t need a lesson on democracy’

Addressing US President Trump’s aide J.D. Vance’s speech at the Munich Security Conference, Merz commented, “Of course, we are not heading towards a ‘tyranny’ as we hear from the US. We really need to reject such statements. Germany was liberated from tyranny by the US; Germany today is stable, liberal, and democratic. We don’t need a lesson on democracy. Therefore, Vance’s speech at the Munich Security Conference was perceived by many, including myself, as overstepping.”

Merz stated he believes President Trump, like everyone else, wants an end to the deaths in Ukraine and senses that Russian President Vladimir Putin has no intention of this.

Merz also expressed that Trump would consider the China/Taiwan conflict in this dispute and would ask himself what it would mean if Putin were to succeed in Europe.

Regarding sanctions that would come into play if Russia rejects a ceasefire demand, Merz said, “We agree among heads of state and government that we must use all possibilities to the fullest. We are talking about further sanctions in the energy sector, in banking, as well as sanctions on assets and individuals. We are currently working on this with our European partners.”

Concerning the possibility of confiscating Russia’s frozen assets, he stated, “We are currently examining this. If there is a possibility to mobilize the money on a clean legal basis, we will do it. However, we must also be aware of the risks such a step entails for the European financial market.”

Merz also emphasized that the Nord Stream 2 pipeline currently has no operating permit and this will not change.

Regarding a possible meeting between Ukrainian President Volodymyr Zelensky and Russian President Vladimir Putin, Merz said, “I am in close contact with Zelensky and European and American partners. We are also talking with the Turkish side. I am not certain whether Putin will demonstrate the courage to come to Istanbul and endorse the ceasefire. But from this weekend onwards, no one can accuse us of not making enough diplomatic efforts to end this war.”

‘We no longer want to conduct arms debates in public’

Merz, who as opposition leader threatened to supply Taurus missiles if the bombardment of civilian facilities did not stop and criticized former Chancellor Olaf Scholz for not doing so, explained why he no longer wants to speak publicly about individual weapon systems:

“I agree with the Defense Minister and Deputy Chancellor that we no longer want to conduct arms debates in public. This is not about not wanting to inform the German public. On the contrary, with these discussions, we are only playing into Putin’s hands and giving him valuable information. We will keep our promises and provide the necessary military support.”

Merz added that the previous government forced them into this debate by discussing the matter publicly.

To a question about Berlin’s role in providing peace guarantees to Ukraine, Merz responded, “I want us to contribute to security guarantees for Ukraine together with European partners and for Europe not to assume a special role. The long-term strengthening of the Ukrainian armed forces will play a key role here.”

Stating that he will visit the German brigade in Lithuania next week, Merz said, “We are part of European and NATO efforts, we are strengthening NATO’s eastern flank and thus also protecting Ukraine.”

Touching on domestic policy, Chancellor Merz pointed to the importance of migration policy. Regarding possible disputes with neighboring countries like Poland, he said, “Many countries, such as Austria or France, have long been taking similar measures. The government in Warsaw recently suspended European asylum law for Poland. The situation for Poland is particularly critical because the country is also a victim of hybrid warfare through migration flows from Belarus and Russia. I have explicitly offered to help protect Poland’s borders, which are also our external borders.”

Emphasizing that the individuals to be deported are not those who have been in Germany for years, but those who should have applied for asylum in another EU country, Merz stated, “We need to regain control over who comes to Europe; I agree with my European colleagues on this.”

To a question about many ministers in the government, including himself, being inexperienced, Merz replied, “We are making new policy. That’s right. We all have sufficient experience—political, entrepreneurial, and life experience. We also have a well-functioning government apparatus and working structures. What could be risky about that?”

‘If Europe does well, Germany does well’

Addressing economic policies, Merz stated that the defense industry and the health sector should be seen not as a burden, but as an opportunity.

“If we want to strengthen our defense capability, for example, we must gradually and rapidly reduce our dependence on the US. It is unacceptable that two-thirds of our money constantly flows to American defense companies. This added value needs to return to us more strongly; not just to Germany, but to Europe,” he said.

Stating that the health sector is the fastest-growing sector, Merz said it was a big mistake for firms like BioNTech and CureVac to go to the New York Stock Exchange.

The Chancellor added, “The state should have been active. I will ensure that such companies can stay and grow in Germany.”

To the question of whether he would say “Germany first” in the event of a conflict of interest at the European level, Merz replied, “No, my decision criterion will be efficiency and the necessary added value. Who is better? We are also in competition within Europe. The French can probably build better aircraft than us. But we can definitely build better tanks than the French. I am primarily committed to German interests, but German interests largely overlap with European interests. If Europe does well, Germany does well.”

‘We must reach pragmatic solutions in parliament’

Stating that they will govern strongly and successfully to strengthen democracy, Merz described the Alternative for Germany (AfD) and the Left Party as “anti-system.”

Acknowledging that the AfD could not be diminished in the last eight years, Merz said, “Let’s stop constantly looking at the AfD. Let’s focus on doing our own job properly.”

Regarding the support he received from the Greens and the Left Party in the second round, he stated, “First of all, we must respect that the voters elected this parliament on February 23, 2025. These are all democratically legitimized members of parliament. And we must reach pragmatic solutions in parliament.”

Emphasizing that the CDU’s party decision rejecting cooperation with both the Left Party and the AfD remains valid, Merz said he was unhappy with the process of classifying the AfD as extremist by the Office for the Protection of the Constitution and would await the assessment of the Interior Ministry. He also added that he has always been skeptical about banning political parties.

To the question of whether he sees himself as “Landesvater” (father of the nation) as Chancellor, Merz replied, “Landesvater; it sounds reassuring, but it also contains a bit of clumsiness. This is not my vision. This federal government works for all 84 million people in the Federal Republic of Germany, that is my message. I will not leave my political views in the Chancellery cloakroom. But I am primarily not the CDU Chairman who occasionally stops by the Chancellery, but rather the Chancellor of the Federal Republic of Germany who also occasionally stops by party headquarters.”

Europe

Israel-Iran conflict postpones EU plan for Russian oil sanctions

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A sudden spike in oil prices, triggered by the conflict between Israel and Iran, has prompted European Union (EU) leaders to reconsider their plans to lower the price cap on Russian oil from $60 to $45 per barrel.

Leaders are concerned that the conflict in the Middle East will further inflate global oil prices, making it unfeasible to tighten sanctions in the current environment.

EU foreign ministers were expected to discuss lowering the price cap at their meeting in Brussels on Monday. However, two diplomats who spoke to Politico stated that this plan is no longer considered viable due to the escalating military tensions between Israel and Iran.

“Given the international situation and volatility in the Middle East, the idea of lowering the price cap is unlikely to gain traction,” one diplomat said. “At the G7 meeting this week, all countries agreed to postpone this decision for now. Prices were quite close to the cap, but now they are fluctuating up and down; the situation is too volatile at the moment.”

Sudden oil price increase disrupts plans

Brent crude, which had been trading below $68 per barrel since early April and had twice fallen below $60, saw its price surge into the 70-79 range after Israel launched a bombardment against Iran last Friday. Russia’s Ural oil was being sold at a discount of more than $10.

European Commission President Ursula von der Leyen noted at the G7 summit earlier in the week that the effectiveness of the current $60 price cap had diminished due to falling prices in the spring.

“However, we have seen oil prices rise in recent days, and the current price cap is serving its purpose,” von der Leyen stated. “Therefore, there is little need to lower it for now.”

Effectiveness of sanctions under debate

The primary goal of the price cap is to reduce Russia’s revenues, as approximately 40% of its budget is allocated to the war. However, achieving this requires a clear oversight mechanism for stricter restrictions, which Russia has largely learned to circumvent using its own “shadow fleet.”

According to an analysis by the Centre for Research on Energy and Clean Air (CREA), a $45 per barrel price cap in May could have reduced Russia’s oil export revenues by 27%, or €2.8 billion. However, experts at the center noted, “This calculation is based on strict and full compliance with the restrictions, which is not at the desired level even now.”

US participation is key

The idea of new sanctions has not found support from Donald Trump, who suggested that Europe should take the first step. According to Maria Shagina, a sanctions expert at the International Institute for Strategic Studies, lowering the price cap without the US would be ineffective.

“Since the price cap was designed as a buyers’ cartel, its implementation requires US participation,” Shagina explained. She argued that it would be better to focus on combating the circumvention of existing restrictions, as “more than 90% of crude oil is currently sold at a price above $60 per barrel.”

Tatyana Mitrova, a researcher at Columbia University’s Center on Global Energy Policy, acknowledged that a lower price cap would be less effective without US involvement. Still, she noted that “the EU and the United Kingdom hold a key advantage in maritime insurance, which would create serious obstacles to sanctions evasion in any case.”

Several European officials familiar with the discussions told Bloomberg that some EU countries believe a lower price cap would only work if the US also participates in the restrictions.

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Germany to expand military with 11,000 new personnel this year

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The German government will provide funding for an additional 11,000 military personnel by the end of the year, according to a report by the newspaper Bild on Saturday, June 21, which cited government sources. This represents an increase of approximately 4%.

The newspaper added that this funding will cover 10,000 soldiers and 1,000 civilian staff through the end of 2025. The decision is part of this year’s budget plan, which is set to be approved by the cabinet next week. The capital required for the expansion will be included in this year’s federal budget.

According to the report, the new positions will span the army, air force, navy, and cyber forces.

German Defense Minister Boris Pistorius stated earlier this month that an additional 60,000 soldiers are needed to meet NATO’s armament and personnel targets. The alliance is bolstering its forces, citing a growing threat from Russia.

The proposal will be a top agenda item at the cabinet meeting next week.

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European central banks cut interest rates amid trade war fears

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While President Donald Trump’s trade war has tied the Federal Reserve’s hands, it is pushing central banks in Europe to support their economies by lowering interest rates.

Following moves last month by the European Central Bank (ECB) and the Bank of England (BoE), the central banks of Switzerland, Sweden, and Norway cut their official interest rates this week.

All five central banks have lowered their growth forecasts in recent weeks. The common theme is that uncertainty about the future of trade, following Trump’s “Liberation Day” tariff announcement on April 2, has damaged confidence and suppressed economic activity.

In contrast, the Fed is not considering an interest rate cut this year, even though the same factors are negatively affecting the US economy. The reason is that the scope and scale of Trump’s tariffs are almost certain to raise inflation in the US.

“Everyone I know is forecasting a significant bump in inflation in the coming months because of the tariffs, because someone has to pay for them,” Fed Chair Jerome Powell told reporters on Wednesday after the US central bank left its federal funds rate target range at 4.25% to 4.50%.

At the meeting, Fed policymakers revised their inflation forecasts for 2025 and 2026 upward, signaling that interest rates will need to remain higher for slightly longer as a result.

“Our job is to keep long-term inflation expectations stable and prevent a one-time increase in the price level from turning into a persistent inflation problem,” Powell said.

In this context, Powell emphasized that the US economy is still growing at a reasonable pace, while unemployment, at just 4.2% of the labor force, is low enough for the Fed to wait a little longer before acting.

The Fed’s cautious stance has angered Trump, who has called Powell a “fool” and said this week that he “might have to force things” if a move is not made soon.

“Obviously, we have a fool at the Fed,” he told reporters in front of the White House before the Fed’s decisions on Wednesday. “There is no inflation. There is only success. I want interest rates to come down.”

On the other side of the Atlantic, the situation is very different. The initial impact of the tariffs was felt in Europe’s export sector. Companies that rushed to ship their products to the US before the tariffs took effect now face a long wait for new orders.

While central banks are still concerned that the trade war could disrupt global supply chains and introduce additional costs that would increase inflation at some stage, that concern has been set aside for now.

“The economic recovery that began last year has lost momentum,” Sweden’s Riksbank said on Wednesday, cutting its interest rate by a quarter point to 2%.

“After a strong first quarter, growth will slow again and remain quite weak for the rest of the year,” the Swiss National Bank said on Thursday morning, lowering its interest rate from 0.25% to zero.

In Norway, where the central bank had resisted cutting rates despite the post-pandemic inflation surge, it announced that the time had finally come to change its stance. Norges Bank also indicated it would cut rates again later in the year.

The BoE left its bank rate unchanged on Thursday, but it had cut rates in May, and Governor Andrew Bailey stated, “Interest rates are continuing on a gradual downward trend.”

The ECB also made its eighth interest rate cut of the past year at the beginning of June, and analysts predict that both central banks will continue to cut rates in the coming months.

As growth slows, inflation is also falling below the level desired by central banks, at least in the short term. The ECB forecasts that inflation will be 1.6% next year before returning to its 2.0% target in 2027.

In Switzerland, inflation turned negative on a year-over-year basis in May, at -0.1%.

The reason for this is largely the shaken confidence in the dollar due to Trump’s policies. The dollar has lost about 9% of its value this year against major Western currencies such as the euro, sterling, and the Swiss franc.

This has caused the prices of many of Europe’s imports, particularly commodities priced in dollars like oil and coffee, to become significantly cheaper in local currency terms.

“Because of the erratic and chaotic new policy style in the US, we have seen European currencies strengthen,” said ING economist Carsten Brzeski, describing them as “a significant driver of deflationary pressures in Europe.”

Indeed, Switzerland’s interest rate cut on Thursday was directly aimed at reducing the appeal of the franc, which global investors see as a “safe haven.”

“We will not take the decision for negative interest rates lightly,” SNB President Martin Schlegel said at a press conference, while acknowledging that he might have to lower the main interest rate below zero again.

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