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Germany requests exemption from EU borrowing limits to boost defense spending

Germany’s request may encourage other countries to follow the same path, Reuters reports

Newsroom April 28 02:20

Germany has requested an exemption from the European Union’s borrowing limits in order to increase its defense spending over the coming years, according to Reuters, citing a letter from German Finance Minister Jörg Kukies.

Kukies had stated in an interview with the agency on Friday that Germany was likely to request such an exemption.

The European Commission has proposed allowing member states to raise their defense spending by 1.5% of GDP annually for four years without triggering the disciplinary measures that normally apply when a deficit exceeds 3% of GDP.

“We view the Commission’s proposal for the coordinated activation of the National Escape Clause of the Stability and Growth Pact as an important complementary measure to enable the increase of national defense expenditures, while also ensuring fiscal sustainability,” Kukies said in his letter.

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The Commission hoped that the proposal would receive broad acceptance from the EU’s 27 member states and contribute to boosting European defense investments by €650 billion over the next four years, aiming to deter potential Russian aggression.

However, so far, only Portugal and Poland have expressed interest in the exemption. Countries with high national debt levels have been reluctant to increase their borrowing for defense spending.

Germany’s request could encourage other countries to follow suit, although Germany’s public debt — 62.5% of GDP projected for 2024 — is significantly lower than that of Italy, France, and Spain, all of which exceed 100% and have shown reluctance to seek an exemption.

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