MNI BRIEF: EU Fiscal Plans Shrouded In Uncertainty - ECB Paper

The implementation of the EU's revised fiscal rules is shrouded in "significant uncertainty" while the flexibility granted to states in order to increase defence spending must be used in a "targeted" way in order to preserve the credibility of the new framework, according to an article in the ECB's Economic Bulletin. 

"Overall, the course of fiscal policy in the euro area in 2025 and beyond remains surrounded by high uncertainty, not least as Member States still have to spell out
their plans regarding defence."  The paper also notes that full implementation of commitments in EU states' fiscal plans will be "crucial" in order to limit the impact of increases in defence spending.

"It is essential that flexibility to deviate from an endorsed net expenditure path is only used for the necessary additional defence spending...This will be important to preserve the credibility of the recently reformed EU fiscal framework, thus achieving the defence spending goals without endangering medium-term fiscal sustainability.  (see MNI: EU Defence Bond Approval To Pave Way For Summer Issuance  )