EU finance ministers have discussed the risk that massive increases in defence spending could undermine the Euro.
Finance ministers met in Brussels yesterday. The meeting was chaired by Ireland’s finance minister and President of the Eurogroup, Paschal Donohoe.
Ahead of the meeting, he said it was “absolutely evident that defence expenditure in Europe, in the years ahead, is now going to start increasing even further.”
Last week European Commission President Ursula von der Leyen announced that she would propose to “activate the escape clause for defence investments.”
That would mean that European countries could hike up the amount of money going to the military without breaking the EU’s economic regulations.
“The rules are a source of stability, Paschal Donohoe insisted yesterday.
“They’re particularly a source of stability for those of us who share a currency…”
“I’m confident that we will find ways in which defence expenditure can be increased while at the same time making the case for the continued economic stability of the Euro and for our economies.”
Some European countries like France and Italy have a high debt rate potentially restricting extra defence spending.
Von der Leyen’s proposals would loosen the purse strings. but that has worried more frugal states.
“Exactly how we are going to do that” is now up for debate, said Paschal Donohoe.
Economy Commissioner, Valdis Dombrovskis, called it “fiscal flexibility”.
“It is something that has been announced by President von der Leyen and currently we are working on exact modalities so it was mentioned and it is something which is on the table, also during today’s meeting, but we did not have an in-depth discussion on this as the Commission will now, in the coming weeks, will prepare the exact modalities.”
NATO allies are under pressure from President Trump to increase defence spending. He says he wants to see all allies spending 5 percent of GDP on defence.
Poland curently spends the most, more than four percent. Many major countries like France and Germany spend around two percent.
Ireland also wants to increase defence spending. The state currently spends just 0.24 percent on defence.