Germany asks for EU leeway on defence spending, letter shows

By Maria Martinez and Sabine Siebold

BERLIN (Reuters) -Germany has asked the European Commission for an exemption from European Union borrowing limits in order to increase defence spending in the coming years, according to a letter from German Finance Minister Joerg Kukies seen by Reuters on Monday.

Kukies told Reuters in an interview on Friday that Germany was likely to request the exemption.

The European Commission has proposed allowing member states to raise defence spending by 1.5% of gross domestic product (GDP) each year for four years without any disciplinary steps that would normally kick in once a deficit is above 3% of GDP.

"We see the Commission's proposal for a coordinated activation of the National Escape Clause of the Stability and Growth Pact as an important complementary measure to enable increased national defence spending while safeguarding fiscal sustainability," Kukies said in the letter.

The Commission had hoped the proposal would be widely taken up by the 27 EU countries and help boost EU defence investment by 650 billion euros over the next four years to deter potential Russian aggression.

However, only Portugal and Poland had so far signalled interest in the exemption. EU countries with high national debt are sceptical of borrowing more to spend on defence.

Germany's request may encourage other countries to follow the path, although its government debt ratio of 62.5% of GDP in 2024 is much lower than that of Italy, France and Spain, which are all above 100% and reluctant to apply for the exemption.

(Reporting by Maria Martinez and Sabine Siebold, Editing by Rachel More and Gareth Jones)