Economic governance: Council approves Germany’s fiscal expenditure path and its flexibility to increase defence spending 12:55 The Council today endorsed Germany’s maximum net[...]

The Council today adopted a recommendation endorsing the maximum net expenditure path for Germany over the next five years, as well as the requested extension of the fiscal adjustment period to seven years, as laid out in its national medium-term fiscal-structural plan.

At the same time, the Council activated the national escape clause under the stability and growth pact (SGP) for Germany to help it transition to higher defence spending at national level while ensuring debt sustainability.

Net expenditure path

The medium-term fiscal-structural plans are a cornerstone of the EU's new economic governance framework. The plans contain member states' fiscal trajectory, together with envisaged reforms and investments. They contribute to strengthening member states' debt sustainability and promoting sustainable and inclusive growth.

The net expenditure paths as set by the Council constitute the most important operational indicator for fiscal surveillance at EU level. This budgetary constraint will frame Germany's national fiscal policies for the next five years and help determine whether it is maintaining healthy finances.

National escape clause

The clause covers a period of four years and a maximum of 1.5% of GDP in flexibility. In practice, this activation means that a new excessive deficit procedure would not be opened for Germany, even if it runs a government deficit exceeding the 3% reference value set in the Treaties, provided that this excess is due to increased defence spending.

For all other expenses, member states remain bound by the budgetary rules and must remain committed to the implementation of the revised economic governance framework irrespective of the clause's activation.

15 other EU member states - Belgium, Bulgaria, Croatia, Czechia, Denmark, Estonia, Finland, Greece, Hungary, Latvia, Lithuania, Poland, Portugal, Slovakia and Slovenia - have also had their requests to activate the national escape clause approved.

The use of this flexibility should contribute substantially to bolstering the defence and security capabilities of the European Union and the protection of citizens. It will also reinforce the EU's overall defence readiness, reduce strategic dependencies, address critical capability gaps and strengthen the European defence technological and industrial base.

• Council recommendation endorsing the national medium-term fiscal-structural plan of Germany and activating the national escape clause for Germany
• Economic governance framework (background information)
• The European Semester explained (background information)
• National escape clause for defence expenditure (background information)
• Boosting European defence expenditure (background information)