The economic update comes as the EU seeks to boost its competitiveness at a time of uncertainty, faced with Russian aggression and US protectionism.
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The European Commission delivered its Spring Package on Wednesday, an economic update that feeds into its five-year plan to boost the EU’s resilience and includes country-specific recommendations.
While fiscal responsibility remains important, the Commission underlined a need to boost defence capabilities.
This comes not only in the wake of Russia’s invasion of Ukraine, but also increased hostility from Washington. US President Donald Trump has continually warned Europe that it needs to increase financial contributions to guarantee its own security.
“Amid rising security challenges, the national escape clause (NEC) under the Stability and Growth Pact is also drawn upon for the first time,” said the Commission.
The NEC allows member states to temporarily exceed maximum growth rates of net expenditure to boost defence financing. A total of 16 countries asked the Commission to implement this mechanism, specifically: Belgium, Bulgaria, Croatia, Czechia, Denmark, Estonia, Finland, Germany, Greece, Hungary, Latvia, Lithuania, Poland, Portugal, Slovakia and Slovenia.
Wednesday’s Package also outlined country-specific recommendations to ensure that EU members are on track to boost their economic standing.
“Member States are encouraged to boost their competitiveness by closing the innovation gap, advancing decarbonisation in line with the Clean Industrial Deal, reducing excessive dependencies, increasing security and resilience, including by building up defence capabilities and promoting skills and quality jobs while ensuring social fairness,” said the Commission.
While 12 member states are considered to be “compliant” in terms of medium-term spending plans, the Commission flagged Cyprus, Ireland, Luxembourg and the Netherlands as countries that could overshoot fiscal limits. Portugal and Spain were considered to be “broadly compliant”.
The Commission noted that Austria, on the other hand, will face a formal procedure to bring its deficit back under control.
Romania was another member state rebuked in the report.
“Romania's net expenditure growth is significantly above the ceiling set by its corrective path, posing clear risks to correcting its excessive deficit by 2030,” said the Commission.
“The Commission is therefore recommending that the Council adopt a decision that establishes Romania has not taken effective action.”
