EU Relaxes Deficit Rules to Fund Defence Spending

In a significant policy shift, the European Union is set to relax its strict deficit rules to give member states more leeway to finance increased defence spending. The European Commission has proposed exempting certain defence expenditures from the normal limits on government deficits, a move that would enable countries to invest heavily in their militaries without running afoul of EU fiscal law. Under the plan, starting in 2025 and lasting four years, EU governments could spend an extra amount on defence equal to up to 1.5% of GDP annually – and this spending would not count toward deficit calculations under the Stability and Growth Pact. For many countries, that translates to billions of euros per year that can be poured into tanks, jets, ships, or troop readiness without worrying about breaching the 3% deficit-to-GDP cap. The Commission estimates that if every member utilized the full exemption, it would amount to around €1 trillion in additional defence investment over 2025–2028; a more realistic uptake would be about €650 billion in extra spending using this flexibility. This unprecedented adjustment of fiscal rules underscores how Europe’s security imperatives are now overriding once-sacrosanct budgetary discipline.