Latvia and 11 other EU countries seek activation of national escape clause for raising defense spending

RIGA - Latvia and 11 other European Union (EU) member states have jointly requested the European Commission (EC) to activate the national escape clause that would allow them to increase defense spending, the EC informed.

Latvia, Estonia, Belgium, Denmark, Finland, Germany, Greece, Hungary, Poland, Portugal, Slovakia, and Slovenia have submitted a request in writing to the Commission to activate the national escape clause under the Stability and Growth Pact, as part of the ReArm Europe Plan/Readiness 2030 package presented in March 2025.

According to the EC, the activation of the national escape clause provides member states with additional budgetary space to increase defense spending, while remaining within the EU fiscal rules.

The activation of the clause will give these member states the possibility to deviate from their endorsed net expenditure paths or their corrective path under the Excessive Deficit Procedure. Such flexibility is foreseen in the event of exceptional circumstances beyond the member state's control, where these have a significant impact on its public finances, as is currently the case, the EC explains.

To ensure fiscal sustainability over the medium term, the deviation from the recommended net expenditure path will be limited to a maximum of 1.5 percent of GDP of additional defense expenditure for each year of activation up to 2028.

The EC will now assess the requests submitted by the member states with a view to putting forward recommendations to the Council to activate the national escape clause as part of the upcoming Spring 2025 European Semester Package. The Council will then have one month to decide on the matter.

Additional requests are expected to be submitted at a later stage as several member states have expressed their interest to take advantage of this clause.

Valdis Dombrovskis, the EU Commissioner for Economy and Productivity; Implementation and Simplification, indicated that the EC will continue to ensure that this flexibility is coordinated and helps EU countries to transit towards higher defense budgets while preserving sound budget policies. He added that the EC remains open for more requests.

As reported, in March the EC presented a White Paper on European defense and preparedness in 2030. The EC also presented a defense package as part of the ReArm Europe plan. It provides financial levers for EU member states to increase investment in defense.

ReArm Europe/Readiness 2030 aims to strengthen Europe-wide defence capabilities through new financial opportunities, while the White Paper sets out a new approach to defense and identifies investment needs.

Dombrovskis stressed earlier that it is important for Latvia that the new EC strategy specifically highlights strengthening the EU's eastern border as a priority, in order to address any Russian and Belarusian threats together with allies.

Dombrovskis noted that the so-called Eastern Border Shield project aims to develop integrated management of the EU's external borders with Russia and Belarus. This includes the deployment of physical fortifications and barriers, infrastructure development, the creation of a modern and integrated border guard system, and other security measures.

Latvia's defense budget for 2025 is planned at 3.45 percent of GDP, or EUR 1.56 billion. The defense budget is projected to grow to 4 percent of GDP next year and to 5 percent of GDP in the following years.

Based on the above figures, the defense budget would need to be around EUR 240 million higher to meet the 4 percent target already this year, while an increase to 5 percent of GDP would require around EUR 690 million more.