ECOFIN | Defence spending not included in deficit
Defence Redefined
Published on 11/12/2023 at 09:01

Pursuant to the Ecofin agreement, Greece’s defence spending is exempted from budget deficit goals.

This has been a fixed position of Athens, which had raised the issue in Brussels in the previous months. “Allies” in this request were other countries with high defence expenditures, such as Italy and France.

For Greece, this exemption means that no cuts in other government spending will be required to cover the costs of armament programs, which are expected to increase in the coming years due to the upgrade of weapon systems with the Βelharra frigates as well as the US F-35 fighter jets.

Economic staff sources say that even if an additional budget is provided, Europe will not allow Greece to use it for new benefits and tax breaks, as the Commission’s strict rules return in the new year, after a nearly four-year hiatus due to the pandemic and the energy crisis.

However, they point out that it will strengthen the Greek economy macroeconomically and in the achievement of fiscal goals, contributing to faster debt de-escalation.

According to the Indicative Report of the 2024 budget, defence spending for the new year will be 1.27 billion euros, increased by 581 million euros compared to 2023, mainly due to increased physical receipts of weapon systems by the Ministry of National Defence.

Also read: EDA | Unprecedented European defence spending exceeding €200 billion

According to the data of the Commission and the European Defence Agency, in 2022 Greece had the second-highest share of expenditure on investments in the defence sector.

In 2022, a total of 20 Member States reached the 20% threshold for defence investment, while the remaining seven needed to take additional measures to reach the jointly agreed percentage.

Overall, a total of 18 member states increased their share of defence investment compared to 2021, while nine reported a decrease, including two that were already below the 20% threshold.

Six of the 27 countries increased their military spending by more than 10% in 2022 – among them Greece (13.3%) – and even more than 30% in the case of Sweden, a country that is waiting to be approved for its accession in NATO. France increased its military spending in 2022 by only 0.7%.

The exclusion of defence spending from the stability pact was not a topic of discussion for the Europeans until Russia’s war in Ukraine – in February 2022 – practically knocked on their door.

Any deal to reform the EU’s economic governance will then need to be negotiated with the European Parliament before the end of the legislative period in April 2024, so that the new rules come into force in 2024.

Also read: SIPRI | Military spending in Europe peaks since the Cold War




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