Published by Global Banking & Finance Review®
Posted on March 11, 2025
2 min readLast updated: January 24, 2026
EU finance ministers support a temporary exemption on defence spending, allowing increased budgets without breaching fiscal rules.
By Jan Strupczewski
BRUSSELS (Reuters) - European Union finance ministers on Tuesday backed a proposal to use the flexibility in the bloc's revised fiscal rules to spend more on defence without triggering disciplinary steps from Brussels for excessive borrowing, Poland said.
The ministers' talks follow an EU summit last week which agreed to boost defence spending by at least 800 billion euros over four years after U.S. President Donald Trump froze U.S. military aid to Ukraine and raised doubts about Washington's commitment to European allies.
The European Commission proposed allowing each EU country to raise defence spending by 1.5% of gross domestic product a year, for four years, without any disciplinary steps that would normally kick in once a government deficit is above 3% of GDP.
The move - known in EU jargon as the "coordinated triggering of national escape clauses" - would be well within the flexibility offered by the bloc's fiscal rules, designed to underpin the euro currency by limiting government borrowing.
"There was broad support for a coordinated national escape clause activation for all countries," Polish Finance Minister Andrzej Domanski told reporters after chairing the talks.
Poland holds the EU's rotating six-month presidency.
More discussions on financing defence will follow at the next meeting of EU finance ministers in April, he added.
If used by all countries to the full, the extra 1.5% of GDP spent on defence could generate 650 billion euros over the next four years, the Commission has said.
This would come on top of proposed EU borrowing of 150 billion euros for common defence projects, to be spent on European-made equipment to boost the local defence industry.
To take advantage of the exemption on spending limits, ministers agreed to broaden the definition of defence spending.
An EU official close to the discussions said the new definition - one backed by the United Nations - covers all defence expenditure, including equipment, infrastructure, personnel costs for soldiers as well as defence production in public factories and dual-use infrastructure.
Under current EU rules, the construction of ammunition factories, soldiers' wages and investment in reinforcing roads and bridges for use by tanks are not categorised as defence spending.
(Reporting by Jan Strupczewski; Editing by Ed Osmond and Gareth Jones)
EU finance ministers backed a proposal to use flexibility in revised fiscal rules to increase defence spending without triggering disciplinary actions.
The EU plans to boost defence spending by at least 800 billion euros over four years.
Each EU country may raise defence spending by 1.5% of its GDP per year for four years without facing disciplinary measures.
The 'coordinated triggering of national escape clauses' allows countries to exceed spending limits for defence, providing significant financial flexibility.
The new definition includes all defence expenditures, such as equipment, infrastructure, and personnel costs, which were previously not categorized as defence spending.
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