Dozen EU Countries Call to Suspend Fiscal Rules to Boost Defense Spending, Spain Still Undecided
In a bold move reflecting Europe’s shifting geopolitical landscape, twelve member states of the European Union have jointly called for the temporary suspension of the bloc’s strict fiscal rules to allow increased defense spending. The proposal, advanced during a recent meeting of EU finance ministers in Brussels, underscores a growing urgency among European nations to reinforce their military capabilities amid escalating global threats. Yet, notably absent from the signatories of this joint initiative is Spain, which remains undecided, navigating a delicate balance between fiscal prudence and security commitments.
A Growing Security Imperative
The push to recalibrate the EU’s fiscal architecture comes as the continent faces a volatile security environment. The ongoing war in Ukraine, rising tensions in the Indo-Pacific, and concerns over transatlantic reliability have intensified calls within the EU for stronger, more autonomous defense capabilities. The proposed measure seeks to provide financial flexibility by easing the rules set forth in the Stability and Growth Pact (SGP), which caps national budget deficits at 3% of GDP and public debt at 60%.
Supporters of the proposal argue that these limits, designed during a time of relative peace and economic stability, no longer reflect the current geopolitical realities. “We are not in 1997 anymore,” remarked Dutch Finance Minister Sigrid Kaag. “Europe must act like a geopolitical power, and that starts with ensuring our armed forces are adequately funded.”
Countries endorsing the initiative include France, Poland, Italy, the Netherlands, the Czech Republic, Romania, Sweden, Finland, Lithuania, Latvia, Estonia, and Greece. Their joint letter emphasized that without additional leeway on spending, many nations will be unable to meet NATO obligations or invest in new defense technologies crucial for continental security.
Spain’s Strategic Ambiguity
Spain’s hesitation to join the group has raised eyebrows both in Brussels and among its allies. Despite being one of the EU’s largest economies and a key player in European defense initiatives, Madrid has yet to take a definitive stance. Sources close to the Spanish Treasury suggest that the government is divided over the potential fiscal consequences of relaxing budgetary controls.
On one side are proponents, including officials from the Ministry of Defense and Foreign Affairs, who argue that Spain must increase its defense spending to align with NATO’s 2% GDP target. Currently, Spain spends just over 1.2% of GDP on defense, one of the lowest ratios among NATO members.
On the other side, fiscal conservatives within the Ministry of Economy and the Treasury warn that suspending fiscal rules could undermine investor confidence, elevate borrowing costs, and derail Spain’s ongoing efforts to stabilize its public finances following the COVID-19 pandemic and recent climate-related reconstruction expenses.
Prime Minister Pedro Sánchez has so far remained noncommittal. In a recent press conference, he stated: “National security is a priority, but so is economic stability. We are evaluating all implications carefully before making a decision.”
Defense and Fiscal Policy: An Evolving Tension
The debate over EU fiscal rules and defense spending is not new, but it has reached a tipping point. Under the current Stability and Growth Pact, member states are tightly bound to maintain fiscal discipline. However, in extraordinary circumstances—such as the 2008 financial crisis or the COVID-19 pandemic—the rules have been temporarily suspended to allow increased public spending.
Proponents of the new defense initiative argue that Europe is once again in an extraordinary situation, this time due to security risks rather than economic contraction. “Defense is no longer optional—it is existential,” said Italian Defense Minister Guido Crosetto. “We need to treat it with the same urgency as a financial crisis.”
Moreover, supporters emphasize that defense spending is an investment, not a cost. Beyond national security, it bolsters research and development, creates high-skilled jobs, and enhances Europe’s industrial autonomy.
Reactions from Brussels and Beyond
The European Commission, which oversees the enforcement of the SGP, has responded cautiously. Economic Commissioner Paolo Gentiloni acknowledged the concerns but warned that any changes must be carefully calibrated. “We understand the need for flexibility, but fiscal sustainability remains critical for the Union’s credibility and cohesion,” he said.
Germany, traditionally a staunch defender of fiscal discipline, has not signed the letter but has expressed openness to discussions. German Finance Minister Christian Lindner stated that while he supports increased defense spending, it should be achieved through spending reprioritization rather than loosening fiscal rules.
Outside of Europe, NATO Secretary General Jens Stoltenberg welcomed the initiative, noting that “greater European defense capabilities contribute directly to our collective security.”
A Defining Moment for EU Fiscal Sovereignty
The emerging rift over fiscal policy and defense illustrates a deeper challenge confronting the EU: how to adapt its economic governance to meet 21st-century security threats without sacrificing financial stability. The outcome of this debate will have far-reaching consequences—not only for European defense but for the future trajectory of the European integration project.
Spain’s eventual position may prove pivotal. As a southern economic heavyweight with considerable influence in EU decision-making, Madrid’s support could tip the balance in favor of a broader consensus. Alternatively, continued indecision may highlight internal fragmentation and hinder collective EU action.
As discussions continue, the bloc faces a fundamental question: Can Europe afford to cling to past economic orthodoxy while its security landscape undergoes radical transformation?