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EU does hasty reset of definition of defence spending
Published by Global Banking & Finance Review®
Posted on March 20, 2025
3 min readLast updated: January 24, 2026
Global Banking & Finance Review®
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Published by Global Banking & Finance Review®
Posted on March 20, 2025
3 min readLast updated: January 24, 2026
The EU redefines defence spending to include more categories, aligning with NATO's 2% GDP target, driven by security concerns.
By Jan Strupczewski
BRUSSELS (Reuters) - When do state investments in arms factories, or the wages of tank crews and pilots not count as defence spending? Answer: When the EU rules say they don't.
Until a few days ago that was the case, with the bloc sticking to a narrow definition of spending on defence hardware.
On Thursday, EU leaders will study ways to mobilise hundreds of billions of euros to boost the military readiness of the bloc, which has hastily redefined what it classifies as defence spending.
The revamp, needed because of Russia's threats to its eastern flank and concern over the U.S.' commitment to European security, means the region's 27 national governments will get a four-year reprieve from EU deficit caps that will allow them to spend more on defence.
But while that spending - worth around 1.5% of Europe's total economy each year - will start to make up for decades of underinvestment in security, it can only be given the green light if everybody agrees on what defence spending actually means.
Before a rule change agreed by finance chiefs last week, the building of an ammunition plant was classified as construction rather than defence - something Poland discovered when it pressed ahead with a new 5 billion zloty ($1.3 billion) factory.
Until now, the defence category was quite narrow, allowing EU governments to apply it only to already-delivered hardware - tanks, planes, guns - while excluding the costs of training, hiring and paying new tank crews, pilots and mechanics.
That will change as the EU broadens the category to include most things that are relevant to defence, including so-called "dual-use" goods that can be used by both the military and civilians.
These include stronger roads and bridges to support the passage of tanks, or the production of drones, helicopters, satellites, radars and underground shelters.
BORDERS?
The wider definition is more aligned with what NATO classifies as defence spending as part of a longstanding target for such expenditure to reach 2% of GDP. But it still leaves a lot of room for interpretation by national capitals.
"The debate went already very broad and now, of course, what you're seeing is specific member states coming with their own specific ideas on what else should be considered as defence," one senior EU official said.
While Italy shares no borders with Russia, its arch-conservative government wants the wider definition to include what it spends on dealing with migrants coming from Northern Africa - a request that will not fly, EU officials said.
EU officials say border protection can be defined as "defence" only if it is refers to part of a military installation built to prevent an invasion, rather than normal border guard spending on patrolling the sea to catch boats carrying migrants.
Spain meanwhile has asked for climate change projects to be included in the defence category, an idea the Commission dismissed in the same way as it did migration-control spending.
While cyber security in general would not make the defence list, EU officials said, computers bought by the military to prevent cyber attacks would qualify.
"The idea is that it has to be of defence relevance," a second senior EU official said.
($1 = 3.8519 zlotys)
(Reporting by Jan Strupczewski; editing by Mark John and Hugh Lawson)
The article discusses the EU's redefinition of defence spending to include more categories, aligning with NATO's spending targets.
The change was driven by security concerns, particularly due to threats on the EU's eastern flank and to align with NATO's spending targets.
Dual-use goods are items that can be used by both the military and civilians, such as roads and bridges that support military vehicles.
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