Germany splits with former frugal allies in push to boost EU military spending

BRUSSELS — A clash is brewing at a summit of European Union leaders over a German-led push to be allowed more leeway to spend on defense.

Thursday's emergency gathering of the bloc’s 27 chiefs aims to thrash out how to cope with the war in Ukraine, the threat from Russia and President Donald Trump's push to the end the decades-long U.S. commitment to European security.

Leaders are focusing on whether to relax the EU’s tough rules that restrict government expenditures, including a proposal by the European Commission that includes exempting defense expenditures up to 1.5 percent of GDP over a four-year timeframe.

"We have to ensure that in the long term, countries spend as much on defense as they themselves and their friends and allies think is right. And that's why we also need to come to long-term changes to the rules and regulations in Europe," outgoing German Chancellor Olaf Scholz said as he arrived at the summit.

For years, Germany has been a vociferous critic of any effort to make it easier for governments to spend money over fears that it could saddle the eurozone with debt and risk the stability of the common currency.

But in a seismic U-turn, Friedrich Merz, the likely next German chancellor, and Scholz's Social Democrats agreed this week to reform a national debt brake and to push to exempt defense spending from the EU’s debt and deficit limits.

Just last year, when the EU's fiscal rules were being renegotiated, Germany’s hardline former Finance Minister Christian Lindner opposed exempting defense spending from those limits.

But the radical shift of policy in Berlin hasn't brought along all of the so-called frugal Northern European countries that used to be Germany's reliable allies on holding the line on increased spending.

“Someone around the table doesn’t have their [Germany’s] same enthusiasm,” said an EU diplomat.

Several diplomats signaled that Austria, Sweden, the Netherlands and, to a lesser extent, Denmark have little appetite to reopen the EU's spending rules.

However, other natural members of that group, including Finland and Latvia, which both border Russia, back Germany's push.

Highly indebted Italy and France — traditionally Germany’s big rivals on the question of more relaxed spending — are also siding with Berlin, eyeing to get even more concessions.

Changing the rules would allow Berlin's incoming coalition, likely comprising Merz's conservatives and Scholz's center-left, to carry out a planned massive defense spending program without falling foul of the EU’s spending police.

"We all have to meet NATO's 2 percent [of GDP for defense] target, Scholz said. "Germany will prepare itself to ensure the financial background for this."

Before the start of the summit, the EU’s ambassadors agreed on a vaguely worded language precisely to keep on board fiscally conservative states from Northern Europe.

EU countries called for the Commission to “explore further measures” to grant them fiscal room to increase their national spending on defense “while ensuring debt sustainability,” according to draft leaders’ meeting conclusions seen by POLITICO before the start of the summit.

Despite some considering a reference to “debt sustainability” too restrictive, the 27 leaders backed it as a reassurance for countries worried about the consequences of a further and longer-term relaxation of fiscal rules.

There almost certainly won't be a final decision at Thursday's summit, and disagreements over this issue are likely to reemerge during a meeting of finance ministers in Brussels next week.

Jacopo Barigazzi contributed to this report.

This article has been updated.