“The use of the existing [fiscal] framework, I believe, will offer ways in which that can be done,” Donohoe said, adding that the spending rules are “an essential element of the stability of the euro area.”
Europe’s security architecture has been upended in a matter of days as the U.S. and Russia begin talks on ending the war in Ukraine, which do not include the EU. Asked whether the EU’s decision-making forums can move quickly enough to resolve issues on the bloc’s defense and economic challenges, Donohoe said: “Absolutely, yes.”
“It is that economic stability that I believe will be a foundation and that we will use to deal with so many of the other security and economic challenges that we confront. But inside that framework there are existing areas of flexibility that are already there,” Donohoe said.
The EU’s fiscal rules, which were agreed after stormy negotiations in late 2023, intend to stop countries exceeding a debt-to-GDP ratio of 60 percent and ensure their annual deficits do not exceed 3 percent. Countries that break the rules can be hit with ceilings on their spending or fines.
But the rules can be temporarily suspended in emergencies under a “general escape clause,” which was used at the start of the COVID-19 pandemic.
Last week, Commission President Ursula von der Leyen proposed triggering the emergency clause in order to allow countries to significantly increase their military expenditure. It remains unclear at this stage whether that would signify the bloc suspending its fiscal rules, or introducing targeted flexibility on a country-by-country basis specifically for defense spending.