EU Commission to activate fiscal escape clause to boost defence spending

European Commission chief Ursula von der Leyen announced on Friday that she will propose to activate the escape clause in the bloc's fiscal rules in a bid to "substantially" boost member states' defence investment. 

The measure, von der Leyen told the Munich Security Conference, would be done in "a controlled and conditional way" and will be followed by "a wider package of tailor-made tools to address the specific situation of each of our Member States."

Under the Stability and Growth Pact, member states are obligated to implement a fiscal policy that aims to keep government deficit under 3% of GDP and debt under 60% of GDP. Failing to do so can result in an Excessive Deficit Procedure (EDP) from the Commission and penalties including fines. Eight member states - Belgium, France, Hungary, Italy, Malta, Poland, Romania, and Slovakia - are currently targeted by such a procedure.

Several EU countries including Poland, Italy, Greece and the Baltics, have been asking for such a review of the Pact, citing the precedent made during the COVID-19 pandemic when the Commission suspended fiscal rules to enable governments to assist companies and citizens with their pandemic-induced bills.

An informal retreat of EU leaders in Brussels earlier this month, dedicated to how to boost defence capabilities and financing across the bloc, had also identified the measure as one of priority, primarily because it is among the least controversial options on the table. 

The bloc needs to invest some €500 billion in its defence in the coming decade in order to continue supporting Ukraine, but also ensure it can protect itself, alone, if needed against any aggression.

Negotiations are also ongoing among NATO allies, which include 23 of the EU’s member states, to raise the defence spending target from its current 2% of GDP level. A decision is set to be announced at a summit in The Hague in late June.

This is a story under development.