Merz warns EU local-content push could dull competition and innovation

What Merz said and where he drew the line

Addressing the Friedrich August von Hayek foundation in Berlin on Thursday, Merz backed open markets and warned against heavy-handed state intervention, applying that lens to EU tools aimed at countering disruptive trade practices. The point, he argued, is to avoid blunting Europe's edge while responding to China.

He said content rules that privilege EU-made inputs risk weakening innovation and flagged concerns after a trip to Asia a week earlier, where leaders pressed him on emerging EU-content plans. The issue, he said, will have to be revisited in Brussels given worries about a "new phase of protectionism." Calling out proposals badges as "Made in Europe," he added, "Where the European debate risks moving too far in the direction of protectionism - as with the rules we now see being called 'Made in Europe,' which our large western neighbor has repeatedly advocated - that is where I put on the brakes, very much in the spirit of Hayek." He further emphasized the pro-competition argument, contending that rivalry drives progress across fields such as renewable energy and artificial intelligence, and summed it up bluntly: "Competition is nothing we need to fear."

The France deal, the car ban shift, and the IAA

Merz has teamed up with French President Emmanuel Macron on taking a harder stance toward China, though he underscored that his backing is not unlimited. Last month, German and French leaders struck a deal that softened the EU's plan to stop sales of fuel-burning cars after 2035 in exchange for stronger European content requirements for domestic industries. In Brussels at the time, Merz said the combustion-engine ban "is history."

That compromise helped propel the EU's Industrial Accelerator Act, a proposal to give preference to vehicles assembled in the bloc with substantial European content. Leaders in Singapore, Japan, and South Korea voiced skepticism about the direction last week, and the IAA still needs agreement from EU member states and the European Parliament.

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Energy subsidies, grid bottlenecks, and the politics

Merz defended a plan to pare back subsidies for renewable power to increase competition in a sector he said is now standing on its own feet. "This is not the end of the so-called energy transition, as some believe," he said. "It is the only way to achieve our environmental goals before a democratic majority simply sweeps those goals aside because they've become unaffordable."

Under the government's blueprint, one possibility is cutting curtailment payments to solar and wind projects in areas where transmission lines are often jammed, a change banks have warned could imperil new investment. Proposals also include limits on rooftop solar. Meanwhile, support is rising for Alternative for Germany on the right, a party that has been a vocal critic of the government's climate agenda.

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