By the end of April, any Member State – who wishes to activate the new escape clause for the defensive costs to submit the request to the European Commission (ed. Commission).
The Commission will then examine the demands and make recommendations in June, with the EU Council making the final decision in July, after strong consultations. The clause, which will apply for four years (2025 – 2028) – after 2028, the EU will evaluate if an extension is required – will allow Member States – the highest fiscal flexibility to increase defense spending, without violating the young people of particular strict rules of the Stability and Development Pact.
According to government agents, the implementation of this clause will be a positive event for Greece, as, due to its geopolitical position, the country has a higher proportion of GDP in defense over time compared to other European countries. In 2022 defense spending amounted to 2.6% of GDPconsistently over -covered NATO’s target for costs of at least 2% of GDP and the European average being 1.3% of GDP.
At the same time, as flexibility is about both investment and current defense -related costs, the opportunity to hire and train military personnel (soldiers, officers, cyber defense). Whereas, according to Commission agents, there is a “window” so that defensive costs that may increase will include costs for new salaries in salaries.
More specifically, the new escape clause (“White Bible”) is a mechanism that allows Member States to increase public spending in critical periods, without violating the EU’s fiscal rules. In this case, the clause is activated exclusively for defensive costs. That is, governments will be able to make more money to strengthen their military capabilities, without calculating these costs on their specified fiscal target.
The whole initiative is part of the EU’s broader attempt to increase its autonomy in the defense and reduce its dependence on third countries.
The ceiling of fiscal flexibility for each Member State is 1.5% of GDP per year. The additional costs will be calculated compared to 2021- the year before Russia’s invasion of Ukraine. Countries that have already increased their defense spending after 2021 will be able to calculate this increase as part of the clause.
Flexibility is both for investment and current defense -related costs. Specifically, they are covered:
- Military equipment markets (ships, aircraft, tanks, weapons, anti -aircraft defense systems).
- Construction and upgrading of military infrastructure (military bases, weapons warehouses, communication networks).
- Recruitment and training of military personnel (soldiers, officers, cyber defense).
- Research and development in the field of defense (new technology, artificial intelligence, drones).
As a prerequisite, Member States are required to obtain equipment from European companies to enhance the competitiveness of the European Defense Industry.
After the end of the escape clause, states should continue to finance their defense spending through their annual budget. If there are orders of military equipment signed before 2028 but subsequently delivered, they will be able to be covered by the clause if they remain within 1.5% of GDP. In 2028, the EU will review the situation and may extend flexibility if geopolitical conditions require it.
Commission agents cite an example for our country, which, with the increase in tensions in the Eastern Mediterranean, will decide to strengthen eg. its airline. In this context, in 2025, the government decides to obtain a new 2 billion -euro anti -aircraft system. The country’s GDP is € 240 billion, so the ceiling of the clause is € 3.6 billion (1.5% of GDP). The system is purchased within the limit, so it is not considered to be the budget to be exceeded and does not lead to fiscal penalties by the EU.
At the same time, Brussels officials point out that Germany will be a more won country. The EU’s largest economic and population country. Germany’s GDP last year was estimated at about 50% larger than the second strongest country, France, and twice that of Italy.
In addition, it is Europe’s only big economy that is not over -pronounced, as its debt amounts to about 62.5% of GDP. So, by abolishing the constitutional debt brake on infrastructure and defense costs, it will implement a huge 500 billion -euro program for infrastructure and so much more for its defense. Amounts that may act as indirect aid for its companies.
On the other hand, there are countries that have been involved in the “vortex” of deficits, such as France, Italy, Spain or Belgium. These Member States may apply the clause with particularly sparing. Indicatively, only recently the International DBS ratings has rushed to downplay France’s prospects, citing the upcoming increase in military spending.
Source: RES – EIA