BERLIN — German Chancellor Friedrich Merz’s government rejected French President Emmanuel Macron’s call for a joint borrowing scheme ahead of an EU leaders summit on Thursday.

In an interview with six European media outlets published Tuesday, Macron urged Europe to launch a plan for new common borrowing, or eurobonds, to boost investment in strategic sectors, framing it as an economic necessity if the continent is to keep up with the U.S. and China.

Berlin strongly rejected the plan just hours after the interview was published, marking the latest in a series of clashes between Macron and Merz on everything from trade to how to deal with U.S. President Donald Trump.

“We think that, in view of the agenda [at the EU leaders summit], this distracts a little from what it’s actually all about, namely that we have a productivity problem,” a senior German government official, who is close to the chancellor and was granted anonymity to speak candidly, said Tuesday.

“It is true that we need more investment,” the official said. “But to be honest, this belongs in the context of the Multiannual Financial Framework,” the official added, referring to the bloc’s budget for 2028-2034, which is currently being negotiated.

Berlin’s rejection of Macron’s proposal came ahead of an EU leaders retreat at a Belgian castle focused on competitiveness set for Thursday. Although the bloc’s 27 leaders are not expected to sign off on concrete outcomes, they aim to identify key priorities for a subsequent EU leaders summit in March in Brussels.

Berlin is pushing for three key goals ahead of the summits: a deepening of the single market; more and faster trade agreements; and a push for less bureaucracy, the official said.

On the issue of competitiveness, Merz has increasingly distanced himself from Macron, who favors more protectionist measures and an interventionist industrial policy. Merz has instead increasingly aligned himself with Italian Prime Minister Giorgia Meloni.

The German government also called for far-reaching reforms of the EU budget.

“It cannot continue as before, with two-thirds of the budget going exclusively to consumptive spending in the areas of agriculture and cohesion,” the official said. “We hope that the member states that are now calling for new funding will also participate in these reform efforts. It cannot be that people call for more money but then fail to tackle the reforms.”

The official added: “European over-indebtedness does not come without a cost.”