The Trump effect: European defence spending and its legal and budgetary challenges

• Department of Economics
• Robert Schuman Centre for Advanced Studies
• PWC: Pierre Werner Chair Programme on Monetary Union
• Tommaso Padoa Schioppa Chair

This EMU Lab seminar will explore how Donald Trump's return to the U.S. presidency has reignited doubts about American security commitments, prompting the EU to boost defence spending and suspend key fiscal rules.

In response to Trump, the EU has swiftly moved to hold in abeyance the application of the Stability and Growth Pact (SGP), the bulwark of the EU fiscal rules, just reformed, exempting member states, for four years, from complying with strict EU deficit rules for defence expenditures. At the same time, fiscal rules have also been shelved at the national level, particularly in Germany, which abandoned decades of commitment to Schwarze null, to introduce a constitutional amendment which enables to annually spend over 1% of gross domestic product (GDP) on defense in derogation of the Schuldebremse. Finally, the EU has also rolled out a new Readiness 2030 programme, which envisions a €150bn fund to finance national rearmament.

This seminar will examine how the current EU strategy to address transatlantic uncertainties has encountered significant legal and budgetary challenges, and how it risks creating asymmetries among EU member states without delivering the necessary deterrence to protect Europe from an increasingly aggressive Russia.

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The Economic and Monetary Union Laboratory (EMU Lab) is a collaborative initiative driven by the Tommaso Padoa-Schioppa Chair and the Pierre Werner Chair, aiming to reassess the Economic and Monetary Union's structure in light of current European and global economic conditions. We seek to identify research and policy innovations to promote stability, growth, and fairness in the EMU, enhancing the resilience of the European economy and society.