Europe’s defence build-up: what financial management should take away
The ECB’s Philip Lane frames Europe’s defence build-up as a structural fiscal, macroeconomic and financial-market regime change, rather than a temporary spending impulse. Euro-area defence expenditure is moving materially higher, with the EU fiscal framework providing up to 1.5% of GDP of additional fiscal flexibility for defence spending during 2025–2028 for countries activating the national escape clause. The composition matters: historically, roughly 53% of defence expenditure has been personnel, 24% intermediate consumption and 19% investment, but the current build-up is expected to shift the mix increasingly towards procurement and capital investment.
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