LIVE: Friedrich Merz special addresses Davos

In the 20th century, my country, Germany, went down this road to its bitter end.

It pulled the world into a black bias.

So let us bear in mind, our greatest strength remains the ability to build partnerships and alliances among equals,

based on mutual trust and respect.

I remind you, after 1945, the United States of America inspired us Germans to embrace this logic.

On this foundation, NATO became the strongest alliance in history.

This is why we hold true this idea.

Now, in recent days, the United States administration has vehemently demanded greater influence in Greenland.

Washington has argued that this is an imperative to counter security threats in the high north.

We welcome that the United States is taking the threat posed by Russia in the Arctic seriously.

This threat is itself an expression of great power rivalry.

It is in both at Europe and the United States.

We experience it daily in hybrid attacks in the Baltic Sea and in Russia's winter war against the people of Ukraine.

We share the conviction that, as European NATO allies, we must do more to secure the high north as NATO.

This is a common transatlantic interest.

Germany is doing just that.

We are doing it in the framework of NATO, and we will do more.

Our neighbors and partners in Europe, including Denmark and the people of Greenland, can count on our solidarity.

We will protect Denmark, Greenland, the north, from the threat posed by Russia.

We will uphold the principles on which the transatlantic partnership is founded, namely sovereignty and territorial integrity.

We support talks between Denmark, Greenland and the United States on the basis of these principles.

I have discussed this with President Trump, Prime Minister Fredrickson, Secretary-General Mark Rutte, and others in these days.

The aim of these talks is to agree for closer cooperation amongst allies in the high north and beyond.

It is good news that we are making steps into that right direction.

I welcome President Trump's remarks from last night.

This is the right way to go.

This is the right way because any threat to acquire European territory by force would be unacceptable.

And, ladies and gentlemen, new tariffs would also undermine the foundations of transatlantic relations.

If they are put in place, Europe's answer would be united, calm, measured, and firm.

As we proceed, we are guided by a clear compass.

Firstly, in the new age of great powers, Europe must stand together resolutely and sovereignly.

And secondly, we should not give up on NATO.

At the historic NATO summit in The Hague last June, we created the material prerequisites for this Europe will invest hundreds of billions of euros in its security.

It was a remarkable transatlantic success.

Now we must repair the trust on which the alliance is built.

Europe knows how precious it is.

We feel deeply that it can be the United States' strongest competitive advantage in an age of great powers.

Democracies do not have subordinates.

They have allies, partners, and trusted friends.

Let me paraphrase this in German in a few words.

We have reached a new world of great powers in a new world of great powers.

In this world is a rower wind.

This world will us to hurt and dangers.

This world will us to hurt and dangers.

That we all feel, that we all feel.

Make us but also please clear, this world we are not allowed.

We can build it.

Let us build it.

We can build it.

Let us try to build it.

Let us be able to build it.

This world will be the best of our own powers.

And exactly what we do.

We invest in our own safety.

We make our economy more competitively competitively.

And we hold it up in Europe.

This will help us, the demand of this new time to be better.

It will open new doors and allow new chances to allow us to make new opportunities.

For our sovereignty, we are going to be united.

And our neighbors in Europe can rely on our solidarity.

Let us, please, with all the frustration and anger of the last months, the transatlantic partnerships will be readily available.

And that is not a fair reference to the principle of hope.

We Europeans, we Germans, know how costly the trust is, on what the NATO is facing.

In the age of great armies, the United States will also be attracted to this trust.

It is your and our important role.

I say it in German.

Autocraties may have undergone.

Demokraties may have partners and reliable friends.

We want to orient ourselves to this sentence.

We will work hard to do so that this does not fall into forgetting.

Under my leadership, ladies and gentlemen, the new German government set two goals.

First, Germany has to regain economic strength.

Second, we want to make Europe a key player again in global politics, economically and particularly in defense.

We need to be able to defend ourselves.

And we need to do so fast.

These goals are complementary.

Economic competitiveness and the ability to shape global politics are two sides of the same coin.

Germany can only lead the way in Europe if we are economically strong.

And Europe's geopolitical influence and our defense capability largely depends on the continent's economic momentum.

Ladies and gentlemen, our policies now need to be exceptionally ambitious and courageous.

We must make progress in four simultaneously areas.

We must continue supporting Ukraine in its fight for just peace.

We must become capable of defending ourselves on our own in Europe.

We want to reduce dependencies that currently make us vulnerable.

And fourth, we want to ensure that our economy can tap into its full potential for innovation and growth.

This will only work if we work together as one European Union.

And be assured, Germany pledges to take a special responsibility here.

That is why we decided right at the start of my tenure to increase Germany's defense spending up to 5% of GDP.

That is a huge increase.

Boosting our military capabilities means to assert our sovereignty.

By systematically strengthening our defense, we are reducing our economic and technological dependencies.

And there is no room for isolationism and protectionism in this agenda.

Instead, we are talking about strategically coordinated ties worldwide.

Europe's trade ambitions are crystal clear.

We want to be the Alliance offering open markets and trade opportunities.

We want to strengthen the rules for fair trade and level playing fields.

Europe must be the antithesis to state-sponsored, unfair trade practices, raw material protectionism, tax prohibition and arbitrary tariffs.

Tariffs, again, have to be replaced by rules.

And those rules need to be respected by trading partners.

On this, the EU is making great progress.

Mercosur has been signed.

And by the way, I deeply regret that the European Parliament has put another obstacle in our way yesterday.

But rest assured, we will not be stopped.

The Mercosur deal is fair and balanced.

There is no alternative to it if we want to have higher growth in Europe.

And most likely, this agreement will provisionally be put in place.

In a few times, this time, the President of the European Commission will travel to India to establish the principles of a free trade agreement between the subcontinent and the European Union.

I was in India a week ago, and I have no doubt whatsoever that the era of great powers presents an opportunity for all of us and for all countries that favor regulations above arbitrary rule and see greater benefit in free trade than in protectionism and isolationism.

And Europe is joining forces with new partners, as you do see in our efforts to finalize trade agreements with Mexico and Indonesia.

In order to make best use of these new partnerships, we need to put our house in order at home.

We are aware of those problems.

Both Germany and Europe have wasted incredible potential for growth in recent years by dragging feet on reforms and unnecessarily and excessively curtailing entrepreneurial freedoms and personal responsibility.

We are going to change that now.

Security and predictability take precedence over excessive regulation and misplaced perfection.

We must reduce bureaucracy substantially in Europe.

The single market was once created to form the most competitive economic area in the world.

But instead, we have become the world champion of over-regulation.

That has to end.

I have therefore mobilized EU leaders to convene for a special summit on February 12th, at which we intend to set the course.

Georgia Meloni and myself, we have formulated a set of proposals we would like to see addressed.

Amongst them are some new ideas.

We propose an emergency break for bureaucracy, discontinuity for legislative work, a modernized EU budget putting competitiveness center stage.

We want to have a fast, dynamic Europe and a service-oriented administration.

I would insist that rapid progress be made, including on the Capital Markets Union.

We cannot allow our European champions to continue being dependent on capital markets outside Europe.

Instead, they should be able to grow in Europe, they should be able to be financed in Europe and they should be able to go public in Europe.

At home, we are making Germany competitiveness again as a place for business and investment both, in industry and our many small and medium-sized enterprises.

Let me tell you, the so-called Mittelstand in Germany has to be reckoned with.

We are providing more targeted support to innovators, removing obstacles from their path and making it easier for them to access capital markets.

We have reduced energy costs.

The focus for our electricity supply is on a combination of renewable energies, storage and modern gas power plants.

In the coming years, you will see massive investments in state-of-the-art power plants, power lines and heat supply.

We will speed up efforts to expand and modernize infrastructure.

500 billion euros have been made available for this purpose.

At the heart of our efforts lies digital transformation.

Artificial intelligence requires industrial scale.

Germany has one of the world's largest pools of industrial data.

That is just one reason why we are investing in high-performance AI, gigafactories, speeding up the expansion of data centers and creating the digital infrastructure for a competitive AI economy in Germany.

Our research and technology policy is guided by a new high-tech agenda.

We are global leaders in so many areas of cutting-edge research.

We want to ensure that innovation gets to market more consistently building industries of the future.

And whoever wants to invest in the future, let me be clear.

You will find a very strong partner in Germany.

We want to be a leading investment location for global capital.

Our policy is to mobilize private sector investments in infrastructure, high-tech and industrial transformation with clear rules, strong institutions and long-term reliability.

Now, ladies and gentlemen, let the headlines of the day not confuse you.

I urge you, look at the bigger picture.

The world around us is changing at unprecedented pace.

The direction it takes must worry us.

The world of great powers is a new reality.

Europe has gotten the message.

Germany has as well gotten the message.

We must and will live up to these challenges.

My government will do its homework and pursue an ambitious reform agenda revolving around security, competitiveness and European unity.

Let us be inspired by what is maybe the most important lesson of enlightenment.

Our fate is in our hands.

It is in our responsibility and our freedom to shape it.

This historic task lies ahead of us.

Germany wants to play a key role in mastering it.

Many thanks for your attention.

Thank you so much, Mr. Chancellor.

Also for being able to create some optimism when this meeting is probably taking place against the most complex geopolitical backdrop.

Maybe since the Cold War or maybe even since 1945.

Let's start with the economic agenda.

You said that Europe is world leader in our regulation.

And I know that you have started reforms with your coalition.

I think you have the finance minister also on the first row.

But how are you going to have Europe walk the talk?

The Draghi report came last year.

There was a lot of momentum.

But how much of the Draghi report has now been implemented?

400 pages.

The report.

How to make this happen.

And you mentioned the decision in the European Parliament last night, for example.

Now, many thanks for this important question.

We have two reports on the table.

The one is Mario Draghi's report on competitiveness.

And the second one is Enrico Letta with his report on the completion of the internal market.

So we will see them both when we have our extraordinary meeting of the European Council in Belgium on February 12th.

We invited them to come.

And Mario Draghi came to Berlin to see me on Tuesday this week.

And we had a long discussion on how we could proceed on his proposals for more competitiveness of the European Union.

My guess is that only 10% of his proposals had been put in place over the last 18 months.

So we have to do much more of that.

And that's the reason why I really welcome that he will come and see us.

And we will have a very long debate.

This is, so to say, an off-site of the European Council.

And we will only talk about competitiveness and only talk about how we can reduce red tape in this European Union and how we can make the way free for new investments.

And my Minister of Economic Affairs and Energy is here as well.

So we are seeing a lot of opportunities how we can do that.

And my meetings during this diverse economic forum in this year making me extremely optimistic that there are many investors, many CEOs here seeing Germany as one of the key places for further investments.

So we have to do our work.

It will not be easy.

I mentioned the European Parliament.

This European Parliament may not become the bottleneck for all these decisions.

The EU Commission has the monopole for making proposals.

This is not easy.

The European Union was never easy.

But it's the best answer to what we can do on the European continent in this changing world.

And my optimism is even bigger after having seen so many people here around the World Economic Forum in Davos this year than it was when I came in yesterday.

No, thank you.

Thank you so much, Mr. Chancellor.

I have been saying in some speeches also before Davos that one should not underestimate the industrial knowledge in Germany.

So if you produce something and manufacture, you can also then pivot to something else as long as you know how to do industry.

But last year, German economy grew again after two years of recession, 0.2%.

I guess that's a little bit anemic to your taste.

So what are you doing to make sure that you will see stronger numbers?

Well, 0.2% is unsatisfactory for an economy like Germany.

The foresight for 2026 has been a little bit improved by the IMF in these days up to 1.1% and 2027 up to 1.5%.

But that is still relying on our investments on infrastructure financed by additional debt.

So this is something we are seeing as a sort of momentum publicly financed but not an upswing which is constantly looking into the future.

We are faced with one big obstacle and that is productivity.

Productivity of the German economy is more or less low for a decade now.

So we have improved that.

And there are four obstacles in front of us in terms of costs.

One is energy.

The second one is bureaucratic burdens.

The third one is taxes.

And the fourth one is labor costs.

And we are dressing them all.

It's not easy.

For example, tax costs has always already been reduced by my government.

We are going down to 10%.

And additionally with other taxes on corporates, we will have around about 25 in Germany in four years time, five years time from now.

That is a good number, but this is not enough.

We have to reduce bureaucratic costs.

We have some small successes last year, reduced bureaucratic costs for our industry last year by roughly 3 billion.

But this is only a beginning.

There has to be more on that.

Labor costs is more or less the biggest issue.

We have to reform our security system, pension, health, but also working time.

The Germans are used to work only 200 hours less than, for example, Swiss companies and workers are working.

We have to address that.

And the energy costs, Katharina Reiche responsible for, had already been reduced fundamentally by roughly 10 billion for this year.

But this is still not enough.

The entire energy system has to be reformed.

And we are on a way to do that, even though it's not easy after, for example, nuclear power plants have been switched off.

This is a final decision.

We cannot recall that, but we have to address it.

New gas power plants will be in place.

So this is work in progress in Germany to make us more competitive.

So we have the Board of Peace being launched here in a few minutes, but I have two short questions to you and then we'll let you go, Mr. Chancellor.

You know, when you meet with your European counterparts or friends, do you feel that they really understand the seriousness of the implementation of the Dragon Report?

I do remember, you know, I think is now more than almost 20 years ago, we had the Lisbon process.

Europe was going to be the most competitive region in the world.

And we just lost competitiveness after the report.

Do you think this time, is it like really serious?

Well, my impression is that my colleagues and partners in the European Council have really understood what is at stake.

As I mentioned that in my speech, the world has so fundamentally changed over the last month and years, that this is now really the time to move ahead and to change things.

And what makes me optimistic is the pure fact that when I was in the European Parliament in the early 90s, we implemented the entire program for the internal market, which was in place on January 1st, 1993.

And this was a great momentum for the European Union.

And we have to recall and remind ourselves that this is something which made Europe strong.

And this was the best address to the world around us in terms of more competition and more competitiveness for the European Union.

And my feeling is that we are sharing the same momentum which we had in the 80s when we talked about sclerosis of the European Union now again.

And that is something we will talk about.

We will have a meeting of the European Council tonight in Brussels to talk about all these challenges.

And my colleagues and myself, we are really addressing that.

And we really hope that we will be able to catch up and to take our decisions which are strongly needed.

Such good answers. I think we end on that optimistic note.

Thank you for your leadership, Mr. Chancellor. Thank you for coming back to Davos.