IV Macro Policy & Sovereign Debt
National escape clause
An exception in EU fiscal rules allowing a member state to deviate temporarily and within limits from its approved spending path in exceptional circumstances beyond its control.
How it works
The EU fiscal framework, overhauled in 2024, sets a four- or five-year ceiling on net expenditure growth for each member. The national escape clause rests on Article 26 of Regulation 2024/1263. A member state requests it, the Commission assesses the request, and the Council may adopt a recommendation within four weeks allowing the deviation. The Council also sets a time limit on the deviation.
Three conditions must all be met. The circumstances must be outside the country's control, have a major impact on public finances, and the deviation must not endanger fiscal sustainability over the medium term. On 19 March 2025 the Commission urged members to use the clause in a coordinated way for defence.
In its defence application, the deviation is limited to the increase in defence spending over a reference year. The annual excess cannot exceed 1.5% of GDP until 2028; anything above that falls under normal surveillance. Defence spending is measured using the COFOG classification. According to the Council's 30 June 2025 text on Bulgaria, full use would add 1.4 points to the deficit and 3.0 points to debt by 2028.
Why it matters here
The clause takes defence outside the debt rule, but it does not make the debt disappear. The deficit is still financed in the market, and the bill shows up in the term premium on extended-maturity bonds. As the clause is used, civilian budgets may tighten, which feeds through to European demand and to Türkiye's exports to that market. That is why we watch the France–Germany spread and the German 30-year yield as the clause's real price.