Posted By Global Banking and Finance Review
Posted on February 14, 2025
By Jan Strupczewski
BRUSSELS (Reuters) - The European Commission will propose exempting defence from EU limits on government spending, the head of the EU executive, Ursula von der Leyen, said on Friday, amid pressure from U.S. President Donald Trump for Europe to finance its own defence.
The U.S. wants European members of NATO to more than double their military expenditure to prepare for a potential Russian attack, rather than counting on help from Washington, because the U.S. is now more focused on threats from China.
Von der Leyen said the lifting of restrictions on defence spending would follow the same logic as the removal of borrowing limits during the COVID-19 pandemic.
"I believe we are now in another period of crisis which warrants a similar approach. This is why I can announce that I will propose to activate the escape clause for defence investments," she said in a speech at the Munich Security Conference.
"This will allow member states to substantially increase their defence expenditure. Of course, we will do this in a controlled and conditional way."
EU debt and spending rules, revised only last year, exist to protect the value of the euro currency by preventing excessive government borrowing.
The rules set an annual net spending limit for governments to make sure that, over four to seven years, their public debt starts to fall.
(Additional reporting by Alvise Armellini in Rome; Reporting by Jan Strupczewski; Editing by Kevin Liffey)
