Germany formally requested the European Commission to temporarily suspend EU borrowing limits, aiming to channel an additional 1.5% of GDP annually into defence over four years, according to Euractiv.
The move, driven by heightened security concerns, tests the bloc’s fiscal discipline framework as Berlin prioritises rearmament.
In the letter, outgoing Finance Minister Jörg Kukies urged Brussels to activate the EU’s “national escape clause” under the Stability and Growth Pact (SGP), which caps budget deficits at 3% of GDP. The exemption would permit Germany to bypass this limit, freeing €60–75 billion yearly for defence upgrades.
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.
The request aligns with Chancellor-designate Friedrich Merz’s proposed €1 trillion infrastructure and military package, marking a stark departure from Germany’s long-standing fiscal restraint.
A Commission spokesperson confirmed Germany’s application – the sole submission to date – but noted “substantial” interest from other members. The clause, part of the EU’s “ReArm Europe” strategy, could collectively unlock €650 billion in defence spending if all 27 states adopt similar measures. Brussels has earmarked €150 billion in low-interest loans for joint projects, though scepticism persists over fiscal risks.
While Portugal has pledged to invoke the exemption and Poland is “seriously considering” it, resistance lingers among nations already breaching SGP rules. Eight countries, including France and Italy, face excessive deficit procedures for exceeding the 3% threshold, complicating their capacity to join Germany’s push. Belgium and Bulgaria remain undecided, with officials privately warning that abrupt spending hikes could unsettle bond markets.
With the Commission projecting a €650 billion defence boost if widely adopted, the exemption’s success hinges on broader uptake.
