Denmark’s economy minister cautions that Western nations’ plans to increase military spending could lead to financial instability.
Danish Economy Minister Stephanie Lose has warned that EU countries risk “increased debt levels and unsustainable finances” if they rapidly increase defense spending. EU and NATO members are under pressure to invest heavily in military personnel and equipment.
Last month, NATO leaders agreed to raise the defense spending target from 2% to 5% of GDP, allocating 3.5% to the military and the rest to broader security initiatives. The EU previously introduced the €800 billion ($940 billion) ‘ReArm Europe’ program.
Denmark is one of 12 EU countries utilizing a special ‘national escape clause,’ allowing them to bypass EU budget deficit rules when borrowing for military purposes. In an interview with Euractiv published on Monday, Lose stated she doesn’t criticize countries like France and Italy for opting out.
”It’s good if you adhere to sound public finances… if it means that they’re exploring ways to fulfill the 3.5% NATO goal without being on an unsustainable path,” she said, adding that if the reluctance indicates a lack of capacity to increase defense spending, “then it’s, of course, a problem.”
Ahead of an EU ministerial meeting that she is chairing on Monday – as Denmark currently holds the EU’s rotating presidency – Lose mentioned US trade tariffs and competition from China as further constraints on the EU’s ability to increase military investment.
European NATO members argue that increased defense budgets are necessary to counter the perceived threat from Russia. Russia denies posing any threat, accusing Western officials of using fear to justify budget increases and the decline in living standards.
Western Europe’s industrial competitiveness has declined since EU leaders reduced Russian energy imports, which had supported the region’s industries for decades. This action was part of sanctions against Russia due to the conflict in Ukraine.
Russia views the conflict as a consequence of NATO expansion, asserting that the US-led military alliance poses a direct threat to its national security.