Politico: European countries abandon austerity in order to defend themselves from Russia
Out of fear of Russia and the possible withdrawal of the United States from NATO, the northern EU countries decided to ease austerity and increase spending on defense and maintaining European sovereignty, writes Politico. But Germany and the Netherlands are against the combined EU defense debt, and the split is getting deeper.
Gregorio Sorgi
The need to confront Russia has changed the attitude of the rich Nordic countries towards austerity.
For years, Germany and its austerity-minded allies have been monitoring the EU budget.
Their motto was simple: No cumulative debts, no budget liberties, and no advances for Brussels.
A group of rich nordic countries – Austria, Denmark, Sweden, Finland and the Netherlands – strictly monitored the budget of the European Union, having superiority over Southern Europe in budget battles.
However, cracks have appeared in the united front of the Northern European countries. The military conflict on the borders of Europe, economic changes and the victory of the US president, who intends to withdraw from NATO, have led to a rethink of the situation. The group of lean countries is weakened precisely when the EU is preparing for another major budget fight.
Previously, the frugal countries had developed a "cohesive, well-prepared strategy to counter ideas related to increased spending," an EU government official with experience in various budget negotiations told Politico.
The upcoming budget negotiations for 2028-2034 promise to be "completely different," according to this representative, who is not named in the article, as well as other people quoted here because they are not allowed to make official statements.
"The group of Scandinavian and Baltic countries is developing a different vision, focused on the issue of security, which distinguishes them from other economic countries such as the Netherlands and Austria," Eulalia Rubio, an analyst at the Jacques Delors Institute, told Politico.
Sovereignty has become a new agenda, and even such staunch "budget hawks" as Denmark or Finland are positive about the idea of using budget funds to strengthen the EU's collective defense and resilience to external threats.
Why did Denmark change its mind
The most important sign of these changes was the New Year's speech by Danish Prime Minister Mette Frederiksen. She stunned EU budget policy makers by advocating increased defense spending, government aid, and investments in European sovereignty.
For a country that has long been skeptical about deepening integration within the EU, Frederiksen's words marked a huge shift.
Against the background of Russia's offensive in Ukraine and statements by the US president who wants to take Greenland away from Denmark, Frederiksen made a big statement, recalling the ideas of EU sovereignty in the style of the French president, which until recently were considered unacceptable by Copenhagen.
"[We] are looking at state aid, the total debt and the EU budget in a new way. This is a new stage," Frederiksen said in her December interview.
Analysts called her remarks a new milestone in Denmark's relations with the EU and a potential wedge in the alliance of the Nordic countries and Germany.
"Frederiksen personally changed her position 180 degrees," said Jakob Funk Kirkegaard, an analyst at the Bruegel center.
In his opinion, this will allow the Prime Minister to "maximize Denmark's influence" in the budget negotiations, as it can act as a link between different groups of countries.
This is an important event. Frederiksen is one of the EU's most stable and experienced leaders, and her country will chair the EU Council on a rotating basis later this year, giving Copenhagen significant influence on the European Union's agenda.
The defense dilemma
However, not everyone is convinced that the "economical" countries are on the verge of a complete split. "A lot of things are murky and unclear on this issue," one EU diplomat warned. "It's hard to understand what the real situation is."
There is no doubt that the Russian-Ukrainian conflict has forced the northern EU countries to think, in particular, about defense spending.
Countries such as Finland and Estonia, which are geographically closer to the conflict site, now support the idea of a combined EU debt to finance arms purchases, although previously this idea was unthinkable for frugal countries.
However, other members of the alliance have not changed their position. Germany and the Netherlands remain strongly opposed to the EU's combined defense debt, underscoring the deepening rift within the coalition.
Austria is also likely to step up its resistance to the idea of cumulative debt if the new chancellor is far-right leader Herbert Kickl, who maintains relations with Russia.
The Union is still alive
The lean countries share a common position when it comes to linking EU regional financing, mainly directed to low-income countries in Southern and Eastern Europe, with structural reforms aimed at increasing the competitiveness of their economies.
According to the EU representative, "the former group of frugal countries has come together again" to oppose increased spending during the November negotiations on the EU's annual budget.
Eulalia Rubio, an expert from the Jacques Delors Institute, predicts that this group is likely to take the same position during the upcoming budget negotiations.: "I don't think that the confrontation between the economically advantaged countries and the beneficiaries [those who receive more money from the EU than they pay to the budget] will end."
She added that "there will be additional pressure from Poland and Eastern European countries, which demand to pay more attention to security issues."
Nevertheless, many believe that the victory of the center-right Christian Democratic Union (CDU) led by Friedrich Merz in the German elections will be a real challenge for the frugal countries.
The CDU-led government is likely to resist major EU spending projects, whether on defense or investments in the green economy.
However, if the main EU country changes its mind and becomes less economical, its unyielding allies are likely to follow suit.
"We are still waiting for the boss's decision," said an EU government official, referring to Berlin. "Germany is a point of attraction in relation to the Multi–Year Financial Framework Program, the EU Budget (MFF), and everyone is watching its position."
