BRUSSELS, Feb 7 (Reuters) - European Union governments are considering expanding the scope of defense investment to enable higher government expenditures without triggering EU penalties for excessive borrowing, officials disclosed.
The call for greater flexibility in defense spending coincides with U.S. President's urging for increased European military expenditures, surpassing the NATO norm of 2% of GDP.
On Monday, there was a plea to enhance defenses against Russia and other threats, urging increased spending to address shortcomings in military capabilities.
A document put forth by Poland, which currently holds the EU presidency, contends that the current interpretation of defense investment focusing solely on military equipment like tanks or planes is too restrictive.
"In light of security challenges, the definition of increased defense investment should be broadened. It should encompass not only the procurement of military equipment but also financial support for arms and ammunition factories to enhance defense capabilities," the document, seen by Reuters, stated.
Additionally, it proposed considering investments in military infrastructure, as well as in facilities serving civilian and military purposes such as the construction of protective shelters or civil defense spending, as eligible for classification as defense investment.
The definition holds significance within the context of the new EU fiscal regulations, which impose limits on government deficits at 3% of GDP and debt at 60% of GDP. An exceeding deficit above 3% due to defense spending would not trigger disciplinary action under these rules.
The regulations also establish a yearly net spending growth trajectory for each EU government, with provisions geared towards a gradual reduction of public debt over the span of four to seven years.
Excluding defense investment from the calculation of yearly net expenditure increases would grant governments more flexibility.
In discussions on augmenting defense spending within EU borrowing limits, the concept of utilizing "national escape clauses" allowing governments to seek suspension of borrowing restrictions due to severe economic downturn or external uncontrollable factors was raised.
Nevertheless, this proposal, not included in the Polish initiative, encountered less favor and sparked controversy among senior euro zone officials.
Following a meeting with EU leaders on defense financing, Commission President Ursula von der Leyen expressed readiness to employ the full flexibility of EU budget regulations, known as the Stability and Growth Pact, to accommodate a substantial rise in defense expenditure.
Trump, who has stirred doubts in Europe regarding U.S. commitment to NATO, emphasized that European NATO members should allocate 5% of GDP to defense - a target not currently met by any NATO member, including the U.S.