Brussels – Go ahead with defence spending and the implementation of the use of Recovery Fund funds, while keeping a close eye on public finance. The European Commission is drafting these recommendations for all EU Member States while adopting the various economic policy coordination measures of the European Semester. “The priorities of this year’s package are summarised by the Commissioner for the Economy, Valdis Dombrovskis, in two words: competitiveness and security.” It is because of this policy that the path of flexibility is chosen on the one hand and the path of inflexibility on the other.
Austria in excessive deficit procedure, EU ‘yes’ to more defence spending
At the expense of this new approach is Austria, the only country at risk of an excessive deficit procedure for which the EU executive has asked to open the file. The deficit/GDP level is too far above the 3 per cent threshold of the Stability and Growth Pact, and therefore triggered the formal notice. Finland (deficit/GDP ratio expected to be 3.7 per cent in 2025 and 3.4 per cent in 2026) and Latvia (deficit/GDP ratio expected to be 3.1 per cent in 2025 and 3.1 per cent in 2026) do not meet the criteria either, but, unlike Austria they have increased public spending on defence, without which they would have their accounts in order, and that is why Brussels decided not to proceed.
In the name of defence, the European Commission gave the green light to suspend the internal stability pact for the 15 countries that requested it. They are Belgium, Bulgaria, Croatia, the Czech Republic, Denmark, Estonia, Finland, Greece, Hungary, Latvia, Lithuania, Poland, Portugal, Slovakia and Slovenia. The request from Germany, for which Brussels awaits the updated government strategy, remains pending. For the rest, the positive opinion on relaxing the national budgetary rules is forwarded to the Council, which will have to give its final approval.
For Dombrovskis, there is no alternative. The spring package of this year’s European Semester “comes at a time when the EU continues to face considerably high global uncertainty and serious security threats.” That is why, for all, “the overarching recommendation is to reinforce overall defence spending.”
Accounts in disarray, hard line for Romania. Ten countries under special surveillance
However, budgetary discipline remains at the heart of the European Commission’s action, which, precisely because of excessive imbalances, calls for measures against Romania. With the excessive deficit procedure already underway, for the Bucharest government, the growth in net expenditure is “significantly above the upper limit set by the corrective path, which entails clear risks for the correction of the excessive deficit by 2030.” Hence, the Commission’s recommendation to the Council to adopt a decision establishing that Romania has not taken effective measures.
