Austria may increase public spending in the name of defence

Brussels – In the name of defence, spending is allowed, even if you are under strict European surveillance for excessive deficit. This is the message coming out of today’s (17 February) meeting of the Economic and Financial Affairs Council (Ecofin), which authorises Austria to suspend the internal stability pact and thus allow the use of public funds to support investment in the defence sector. The 27 ministers of economy and finance gave the green light to activate the national safeguard clause under the Stability and Growth Pact, the mechanism that allows the temporary suspension of public spending control rules.

The clause covers a period of four years and a maximum of 1.5 per cent of gross domestic product in terms of spending flexibility, i.e. the deviation from the deficit (3 per cent in relation to GDP) and debt (60 per cent in relation to GDP) parameters is not taken into account for the purposes of calculating deficits.

The flexibility provided for in the national safeguard clause will have no effect on Austria’s ongoing commitment to address its current excessive deficit, Brussels specifies, “provided that the flexibility is only used to increase defence spending.” The use of public finances in other areas or sectors will not be tolerated.

The decision by the Ecofin Council is noteworthy, given that Austria was subject to an excessive deficit procedure in the summer. The country must therefore correct its imbalances according to a set timetable (the maximum limit allowed to return below the 3 per cent threshold is the end of 2028) and in forced stages (the nominal growth rate of net expenditure must not exceed 2.6 per cent in 2025, 2.2 per cent in 2026, 2.2 per cent in 2027 and 2 per cent in 2028).

“The measure will help Austria move towards higher defence spending at the national level without jeopardising the sustainability of its debt,” says the Cypriot Presidency of the EU Council, convinced of the need for this decision given the European agenda.

To date, 16 other EU Member States have had their requests to activate the national safeguard clause approved. These are Belgium, Bulgaria, Croatia, Denmark, Estonia, Finland, Germany, Greece, Latvia, Lithuania, Poland, Portugal, the Czech Republic, Slovakia, Slovenia, and Hungary. Austria brings the total number of Member States exceeding the limit in the name of defence to 17.

English version by the Translation Service of Withub