MNI: EU Escape Clauses Linked To Trade, NATO Talks - Officials

The final count of European Union states applying for national escape clauses from fiscal rules is only likely to be clear after trade talks with the U.S. and a NATO summit on June 24-25, with major capitals likely to delay decisions on whether and how much to boost military spending in order to maximise negotiating leverage, EU sources told MNI

While 14 out of 27 EU members, including Germany and Poland. have applied for the escape clause from the bloc's fiscal rules, this tally does not include large economies such as France, Italy, Spain and The Netherlands. (See MNI INTERVIEW:Spain Unsure On Fiscal Escape Clause For Defence)

"One has to see it in the context of the NATO conversation and the conversation with the U.S. as well," one official said.  "All of this is interlinked.

NATO Secretary General Mark Rutte has called on EU states to boost their average defence spending from around 2% of GDP to 3.5%, while U.S. President Donald Trump has publicly pushed for 5%. 

"I could imagine that, for the bigger countries that are heavily engaged in negotiations with the U.S. - even though that is officially the domain of the [European] Commission - this has to be on the table as well as part of the ongoing tit-for-tat," another official said.

ITALY, SPAIN

For Italy and Spain, sources note, that there has been a lack of buy-in to the idea of the escape clause, given already-tight fiscal situations and weak support among voters for higher defence spending. That lack of existential urgency makes defence spending a possible bargaining lever in something they do care about - trade relations with the U.S. 

"For a country like Italy, it is natural that it becomes part of the bigger picture of its relations with the U.S.," another source said.

The Commission clarified earlier this week that states are free to apply for a national escape clause whenever they are ready while the EC and EU expect to conclude their approvals of the current crop of applications by early June. 

EU-U.S. trade talks will continue this week, although only at technical level while EU Trade Commissioner Maros Sefcovic visits Tokyo.