The Spanish government, led by Prime Minister Pedro Sánchez, has urged the European Union to adopt a “more ambitious and bolder” budget of at least 2% of annual GDP to address the challenges posed by the return of US President Donald Trump and his aggressive trade policies.
In a statement released on Monday, Sánchez’s coalition government (PSOE/S&D, Sumar) emphasised the need to double the EU’s current budget to reinforce Europe’s resilience and competitiveness.
The proposal, outlined in a strategic document, aims to bolster the EU’s ability to navigate Trump’s trade war, which includes 25% tariffs on steel and aluminium imports, as well as to enhance defence capabilities and support the green and digital transitions.
Sánchez’s government highlighted several areas requiring increased investment, including security, defence, climate change, energy interconnections, and technological development. The statement referenced reports by former European Central Bank president Mario Draghi and former Italian Prime Minister Enrico Letta, which called for significant EU investment to remain competitive with the US and China.
Draghi’s report, presented last September, estimated that the EU would need €800 billion annually to decarbonise and digitise its economy while boosting defence capacity. Madrid also stressed that European security extends beyond military threats, encompassing cyber-attacks, climate change, terrorism, and organised crime.
Joint debt financing
Spain currently allocates 1.8% of its GDP to defence, with a commitment to reach 2% by 2029. However, this falls short of the 5% demanded by Trump from NATO allies. Sánchez’s government argued that increased EU spending is essential to address both traditional and emerging security challenges.
To fund these initiatives, Spain proposed the creation of a “joint debt mechanism” and called for refinancing the debt from the EU’s Next Generation funds for an additional 10 years. This approach aims to enable continued investment in critical areas without overburdening individual member states.
The proposal is likely to face resistance from the so-called “frugal” EU countries, including the Netherlands, Austria, Denmark, and Sweden. These nations have historically opposed increased EU spending financed by common debt, advocating instead for cuts in social policies and stricter fiscal discipline.
As the EU prepares to negotiate its 2028-2034 multiannual budget, Spain’s call for a more robust financial framework reflects its growing influence within the bloc. With its economy outperforming the Eurozone average, Spain is positioning itself as a key advocate for a stronger, more resilient Europe in the face of global geopolitical shifts.
