The European Union is considering giving additional time to member states to balance their budgets if they invest in increasing munitions production, which is a priority after the Russian invasion of Ukraine. The proposal still needs to be approved by EU member states and the European Parliament.
Military expenditures, including bullets and grenades, are seen as supporting one of the most important strategic goals of the Union today. As a reward, member states would then have up to seven years more time to adjust their government accounts, EU officials told Bloomberg.
The proposal is part of the review of the EU’s Stability and Growth Pact, the rules governing public spending. Legislative proposals have been made by the EU Commission to make these rules more flexible. This possible extra leeway does come with requirements, says a spokesman for the Commission. Each Member State’s reforms and investment proposals should be assessed together. And it should be ‘sufficiently detailed, financially justifiable, time-bound and verifiable’.
The proposal would also complement the European Commission’s plans to strengthen the defense industry. Ammunition has become a priority for the EU as a result of Russian aggression against Ukraine. The EU has pledged to provide 1 million grenades to Kiev over the next 12 months to support the country in time of war. In addition, the EU should replenish its own stocks and strengthen production to prevent shortages in the future.
Finance Minister Sigrid Kaag is concerned that the negotiations on new European fiscal rules are being delayed. During the meeting in Stockholm she urged her EU colleagues to speed up the process, with extra meetings if necessary, she says. Sweden, which holds the EU presidency until July 1, does not want to put the reform of the Stability and Growth Pact on the agenda until June. ‘That is worrying,’ says Kaag. ‘Before you know it, it will be September.’ Negotiations should lead to a deal this year on what Kaag believes will be a ‘credible, measurable’ reduction in the medium term of too high government debts in the euro countries.