German Chancellor Friedrich Merz did not rule out common European Union borrowing for defence during a trip to Brussels on Friday, but said it must be for exceptional circumstances and voiced concern about rising global debt.

Visiting Brussels for the first time as chancellor, Merz also said he was now more optimistic about the future of Nato than in February, when he questioned whether the alliance that has been the bedrock of European security would still exist in its current form when its leaders meet in June.

He said US President Donald Trump's administration, which has warned European allies it will not protect them if they do not spend enough on defence, had now recognised that Europeans were taking more responsibility for their own security.

"America is indispensable for the security of Europe – today and for a long time to come," Merz told reporters at Nato headquarters.

"I am very thankful today that I can come to a more optimistic assessment of the future of Nato."

Russia's war in Ukraine and its hostility towards other European countries, coupled with fears that the US might not come to the aid of Nato allies, have prompted many European leaders to ramp up defence spending and vow to do even more.

That has led many European governments to back common EU borrowing to fund a defence spending splurge.

But fiscally cautious Germany, the EU's largest economy, has traditionally rejected common borrowing, with the exception of during the Covid pandemic, when it was used to fund recovery projects. (Reuters)