The government expects fiscal breathing space, within reasonable limits and without jeopardizing fiscal discipline, from the European Commission’s proposal to exempt defense investments from the spending limit of the new Stability Pact, by activating the escape clause.

As National Economy and Finance Minister Kostis Hatzidakis wrote in Sunday’s Kathimerini, in principle, Greece supports the position of Commission President Ursula von der Leyen, provided that the escape clause does not just concern countries with defense spending of 0.5% or 1% of GDP, in order to facilitate their reaching the NATO spending limit.

Indeed, reports indicate that such a proposal is on the negotiating table in Brussels, namely to exempt defense spending from the spending limit of the new Stability Pact until it reaches at least the 2% of GDP set by NATO or higher, at 3%. The NATO limit has not been met by many European countries, such as Italy, Spain, Portugal, Belgium and Slovenia. However, Greece already spends around 3% of its GDP on defense, so such an arrangement would not offer it anything.

It is no coincidence that the head of the Prime Minister’s Economic Affairs Office, Michael G. Arghyrou, said on Wednesday at a Commission event that countries that have consistently high defense spending and cover the 2%-of-GDP limit should not be “punished.”

The government will obviously seek a special arrangement for its case and other countries with high defense spending, which will allow them to exempt at least part of defense investments from the spending increase limit. This could be, for example, an amount of around 500 million euros, which corresponds to the annual increase in defense investments over the next two years.

Together with the approximately €400 million that already exists as a margin for increase for 2026, a satisfactory space could be created for tax breaks, additional defense and other development investments, as the government is thinking about it, though not for scenarios of benefits without measure, such as the full restoration of bonuses to pensioners and civil servants, costing €8 billion.

Source: Ekathimerini.com