Since yesterday’s presentation of the latest figures there is clarity about the defense budget for the current and coming year. Although the armed forces will have to save a total of 161.8 million euros in the administrative area, the defense budget will nevertheless increase significantly: from 4.015 billion euros in 2024 to 5.184 billion euros in 2026.
As Militär Aktuell has now learned, additional financial support for the defense sector could come from Brussels, particularly with a view to the years after 2026. The Austrian federal government is planning to activate the national escape clause of the EU Stability and Growth Pact in order to implement the strategic “Recovery Plan 2032+” – a step that could enable targeted investments in security-related infrastructure and capabilities.
What is the escape clause of the EU Stability and Growth Pact?
As part of the White Paper “ReArm Europe Plan/Readiness 2030”, the EU Commission has given member states the opportunity to use additional financial policy leeway to increase their defense spending.
“The era of the peace dividend is long gone. We need to invest in defense, strengthen our capabilities and take a proactive approach to security.”
EU-Kommissionspräsidentin Ursula von der Leyen
EU Commission President Ursula von der Leyen announced an investment volume of over 800 billion euros for this, which will be spread across three central areas:
- Budgetary leeway through derogation:
Member states may deviate from the requirements of the Stability and Growth Pact by up to 1.5 percent of gross domestic product (GDP) per year to finance defense spending – for a period of up to four years, provided the clause is activated. - Joint borrowing by the EU Commission:
The Commission is planning to raise up to 150 billion euros on the capital markets. The new financing instrument provides for long-term loans with a term of up to 45 years and a redemption-free initial phase of ten years – at competitive conditions and with a solid structure. - Leverage effect through the EIB Group and private investment:
In addition, the European Investment Bank (EIB) is to play a key role. By accelerating the Savings and Investment Union, private capital is to be mobilized and made available specifically for security-relevant investments.
The planned investments in the armed forces will come. We are continuing on the path towards a modern and defensible army. #missionforward pic.twitter.com/ska5rT9Cox
– Klaudia Tanner (@tannerklaudia) May 14, 2025
The areas supported include air and missile defense, artillery systems, missiles and ammunition, drones and anti-drone systems, so-called “strategic enablers” and critical infrastructure protection, including in relation to space, military mobility, as well as cyber, artificial intelligence and electronic warfare.
It is still unclear whether the activation of the escape clause will be associated with restrictions on tendering for European systems. A number of countries have already ordered significant quantities of military equipment from EU third countries.
Escape clause meets with broad interest
As of the beginning of May, twelve member states have already applied to activate the national escape clause: Belgium, Denmark, Germany, Estonia, Finland, Greece, Hungary, Latvia, Poland, Portugal, Slovakia and Slovenia.
“The ‘Mission Forward’ will become the ‘Mission Upwards’ for our soldiers. The urgently needed investments in the armed forces have been secured as part of the ‘2032+ reconstruction plan’.”
Verteidigungsministerin Klaudia Tanner
With the 2025/26 double budget, the Armed Forces will still receive sufficient funds to implement the “Armed Forces 2032+” build-up plan in the current and coming year. However, in view of the funds approved for the Armed Forces under the Federal Finance Framework Act 2026 to 2029, it may be necessary to activate the national escape clause from 2027.
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