EU member countries should use current period of fiscal flexibility to adjust their budgets for higher defense spending - Dombrovskis

RIGA - European Union member countries should use the current period of fiscal flexibility to gradually restructure their budgets, taking into account that defense spending will be higher in the foreseeable future, European Commissioner for Economy and Productivity Valdis Dombrovskis (New Unity) told LETA.

Increasing defense spending is particularly relevant for Latvia, which shares a border with Russia, but this puts pressure on other budget items and the budget deficit, said Dombrovskis.

From 2025 to 2028, EU member countries will have additional flexibility under EU fiscal rules regarding defense spending, which may amount to up to 1.5 percent of gross domestic product annually.

According to Dombrovskis, during this period countries can increase defense spending without immediately adjusting other budget expenditure items or revenues. A return to the usual EU fiscal rules is to begin in 2029.

Dombrovskis noted that countries must also address budget sustainability issues. In Latvia, these issues may not be as pronounced as in other countries with high debt levels. Interest rates on government borrowing currently remain relatively high, and all countries must work to put their budget deficits and debts on a downward trajectory, he said.

When asked about support for eastern border regions provided for in the next EU multiannual budget, Dombrovskis explained that a member country's status as an eastern border region is one of the criteria used in calculating the national allocation. In the European Commission's proposal for 2028-2034, Latvia would be allocated EUR 9.3 billion, and Latvia's status as a border region has already been taken into account in this calculation.