BRUSSELS – The President of the European Commission, Ursula von der Leyen, announced on Friday that the costs allocated by member states for defense will be exempted from the rules on limiting budget deficit.

Von der Leyen announced this measure in her speech at the International Security Conference in Munich to free up fiscal space in member states’ budgets for increased defense spending.

The Commission also used the provision on derogation from the Stability and Growth Pact, which prescribes that the budget deficit must not exceed 3 percent of GDP and public debt 60 percent of GDP, even during the covid-19 pandemic to allow member states to finance measures to support businesses and citizens through a larger budget deficit.

“In previous extraordinary crises, we empowered member states with additional fiscal space by activating the derogation clause. Simply put, we enabled member states to significantly increase public investments related to the crisis,” said von der Leyen.

“I believe that now, in another crisis period, similar measures are required. That’s why I can announce that I will propose activating the derogation clause for defense investments. This will allow member states to significantly increase their defense expenditures,” said von der Leyen.

She emphasized that this derogation will be controlled and conditioned.

The situation in each member state will be analyzed, from their current level of defense spending to their fiscal situation, and accordingly, a toolkit will be proposed to address the specific needs of each of them.

Joint investments in much-needed common defense projects of European interest are also planned. Von der Leyen said that the EU needs to allocate far more for defense. Currently, member states spend about two percent of their GDP on defense. Before the war in Ukraine, member states spent slightly more than 200 billion euros on defense, and today it has grown to over 320 billion.

“But we will have to significantly increase that number once again,” said von der Leyen, adding that an increase from slightly below two percent of GDP to above three percent means hundreds of billions of euros more investment every year. (February 14, 2025)