“We are analyzing. […] We will, of course, have a dialogue with the Commission, also with the Socialist Party given we are in a pre-electoral period, and we will announce the decision in due course,” stated the Finance Minister, Joaquim Miranda Sarmento, in an interview with Lusa news agency.
The European Commission requested that by the end of this April, member states activate the national safeguard clause under the strict community budget rules to allow increased defense spending in response to current geopolitical tensions, without the risk of facing an Excessive Deficit Procedure (EDP).
Though this is not a formal deadline, it is noted that Lisbon has not yet made any request to Brussels, despite the community institution indicating a preference for countries to opt for the safeguard clause to avoid any reputational risk for those who proceed with it.
The European Commission aims for all EU countries to comply, even if they do not require this fiscal leeway.
Benefiting from a surplus and economic growth, the Portuguese government maintains that it does not need such relief from the EU’s stringent deficit and public debt rules to increase defense spending, given the country’s fiscal balance.
Other countries, including the Czech Republic, Malta, Latvia, Belgium, and Greece, have expressed interest, according to European sources speaking to Lusa.
On Saturday, the European Commission stated its expectation that by April, the “vast majority” of EU member states would request the activation of the national safeguard clause for increased security investments.
This initiative is part of a broader 800 billion euro defense plan within the EU, which involves activating the national safeguard clause under budgetary rules to avoid EDP (to boost public defense spending by up to 1.5% of GDP annually, totaling 650 billion euros over four years) and introducing a new European credit instrument for extraordinary circumstances (totaling 150 billion euros, akin to the favorable loan terms established during the COVID-19 crisis to prevent unemployment).
The Portuguese government has yet to decide whether to utilize these loans, as Joaquim Miranda Sarmento relayed to Lusa: “We do not have anything finalized, we are analyzing.”
“We will look into what the gross financing needs of the Portuguese state are, consider different instruments, and seek to make the choices that we believe are the most efficient for public finances,” he concluded.
The remaining aspects of the European Commission’s plan include reallocating funds from other budgets—such as Cohesion funds for civilian and military projects—funds from the European Investment Bank (which is expected to adopt more flexible rules for these investments), and private capital.
The EU may need to allocate 250 billion euros per year, equivalent to 3.5% of its Gross Domestic Product (GDP), for its security in response to the war in Ukraine following the Russian invasion.
Between 2021 and 2024, member states’ defense spending increased by over 30%, reaching 326 billion euros, or roughly 1.9% of the EU’s GDP.
Last year, Portugal invested around 1.55% of its GDP in defense and has indicated it will reach 2% before the previously set date of 2029, though specific details on how and when remain undisclosed.
