Speaking at a press conference alongside Polish Prime Minister Donald Tusk, Merz pointed to recent changes to Germany's constitutional debt rules to largely exempt defence spending.

"We could imagine something similar for the European fiscal pact or fiscal rules," he said.

The continent has been looking to rearm following Russia's invasion of Ukraine and US President Donald Trump's changing stance on European security.

In April, the European Commission said it would relax strict rules limiting public debt in order to allow states to spend up to 1.5 percent of national output on defence for four years.

EU members are bound by spending rules obliging them to keep the public deficit below three percent of economic output and debt at 60 percent of GDP.

But the EU can suspend the rules in exceptional circumstances and crises, as it did during the coronavirus pandemic when states had to prop up their embattled economies.

Sixteen countries, including Germany, have said they want to make use of the exemption.

Merz and his Social Democrat (SPD) coalition partners pushed the change to Germany's constitution through the outgoing parliament earlier this year, enabling a "bazooka" of borrowing to upgrade Germany's defence and infrastructure.

Merz also said it was important for the EU "to produce more" of its own military equipment and to harmonise weapons systems across member states.

"We must make sure the European members of NATO, and the whole European Union, are able to defend themselves on a long-term basis," he said.