MNI: Brussels To Stick With 4-Year Plan Despite German Plea
MNI (BRUSSELS) - The European Commission looks set to stick with its proposal for a four-year national escape clause from the bloc's fiscal rules for states which boost their defence spending in its White Paper on defence funding due next week, according to sources close to the talks
Brussels fended off efforts by Germany, which wanted a more permanent exemption for its own massive defence surge, to align with the amendment it has proposed for its own national debt brake.
The Commission preferred to go ahead without any legal changes to the fiscal rules, which the German call would have required, a source told MNI.
The perceived need for market credibility in the wake of last week's German bund sell-off seems to have played a role in the EU's decision to stick with its own time-limited proposal rather than opting for an extended 10-year plan as had been mooted in talks with EU states. (see MNI: EU Moots Extending 4-Year Defence Exemption To 10-Paper )
Higher-debt states were also said to have been concerned that an extended suspension might have harmed their funding terms.
STIGMA
Sources said that the Commission seems satisfied that it has also addressed potential stigma issues surrounding the application process for the suspensions. (see MNI: EU Seeks To Avoid Stigma From Fiscal Opt Outs For Defence )
The procedure will involve member states applying for a national escape clause and then being assessed on the basis of their 2025 and 2026 net expenditure paths as set out in their medium-term fiscal structural plans.
The Commission is considering making the assessments for all applicant countries as part of its Spring Package in June, in which it usually issues its annual economic policy advice to member states. It will then be up to member states to give final approval.
States can then go ahead with defence spending increases up to 1.5% of GDP without the need for submitting a new debt plan.