“Excluding the increase in defense spending, budgetary restraint remains appropriate, and we are committed to implementing our medium-term plans in line with the new governance framework. We foresee an overall neutral fiscal stance in the euro area by 2026, which seems adequate in the current economic context,” states the Eurogroup in a position released today.
In the joint statement, eurozone finance ministers emphasize that “strengthening Europe’s defense capabilities is among the main priorities” and are committed to enhancing “defense, security, and overall readiness, while maintaining debt sustainability.”
“The fiscal stance of the euro area was contractionary in 2024 and is expected to become broadly neutral in 2025, based on the Commission’s forecast. This seems appropriate given a more negative macroeconomic outlook and the reduction of inflationary pressures and is in line with the need for budgetary prudence in the member states, particularly those with high debt,” the Eurogroup adds.
At the end of June, gathered in Brussels, EU leaders committed to adequately financing the increase in defense spending, coordinating such investment to “do it better together,” given NATO’s new target set days earlier.
The EU heads of government and state also asked the European Commission and the EU’s chief diplomat, Kaja Kallas, to present a roadmap to achieve the EU’s common defense readiness by 2030.
At the NATO summit, the 32 allies of the Atlantic Alliance committed to spending, by 2035, 3.5% of GDP on traditional military expenses (armed forces, equipment, and training) and an additional 1.5% of GDP on cybersecurity infrastructure, readiness, and strategic resilience, an increase from the current 2% target.
Between 2021 and 2024, EU member states’ defense spending increased by more than 30%, reaching 326 billion euros, equivalent to about 1.9% of the community’s GDP.
Portugal invested about 1.55% of GDP in defense last year and has already stated that it will reach 2% this year.
In an interview with Lusa released last week, the President of the European Council, António Costa, stated that investing in defense without preserving the European Union’s social state would be a “collective suicide.”
