Recommendation for a COUNCIL RECOMMENDATION Allowing Austria to deviate from the maximum growth rates of net expenditure as set by the Council under Regulation (EU) 2024/1263 (Activation of the national escape clause)
Date: 2026-01-20
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Austria, European Semester, budget deficit, defence expenditure, gross domestic product, multilateral surveillance, public debt, public expenditure, stability pact, structural adjustment

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   EUROPEAN COMMISSION  Brussels, 20.1.2026  COM(2026) 33 final  Recommendation for a COUNCIL RECOMMENDATION Allowing Austria to deviate from the maximum growth rates of net expenditure as set by the Council under Regulation (EU) 2024/1263 (Activation of the national escape clause)   
 
Recommendation for a 

COUNCIL RECOMMENDATION 

Allowing Austria to deviate from the maximum growth rates of net expenditure as set by 
the Council under Regulation (EU) 2024/1263 
(Activation of the national escape clause) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Article 121 thereof, 

Having regard to Regulation (EU) 2024/1263 of the European Parliament and of the Council 
on the effective coordination of economic policies and on multilateral budgetary surveillance 
and repealing Council Regulation (EC) No 1466/971, and in particular Article 26 thereof, 

Having regard to the recommendation from the European Commission, 

Whereas: 

(1) 

(2) 

(3) 

Regulation (EU) 2024/1263, together with the amended Regulation (EC) No 1467/97 
on speeding up and clarifying the implementation of the excessive deficit procedure2, 
and  the  amended  Council  Directive  2011/85/EU  on  requirements  for  budgetary 
frameworks of the Member States3 are the core elements of the reformed EU economic 
governance  framework.  The  framework  aims  at  ensuring  public  debt  sustainability, 
and  sustainable  and  inclusive  growth  through  reforms  and  investments.  It  promotes 
national  ownership  and  has  a  medium-term  focus,  combined  with  an  effective  and 
coherent enforcement of the rules. 

The maximum growth rates of net expenditure as set in a Council recommendation in 
accordance with Articles 17(1), 19 or 20 of Regulation (EU) 2024/1263 are the single 
operational reference for the annual fiscal surveillance of each Member State and  are 
at the centre of the new economic governance framework. The maximum growth rates 
of  net  expenditure  as  set  by  that  Council  Recommendation  establishes  a  budgetary 
constraint for four or five years, which is based on an adjustment period of four years 
that can be extended by an additional period of up to three years. 

The framework provides for flexibility in  the application of the rules in  the event  of 
exceptional  circumstances  outside  the  control  of  Member  States  that  have  a  major 
impact  on  the  public  finances,  in  accordance  with  Article  26  of  Regulation  (EU) 
2024/1263.  In  the  latter  case,  following  a request  from  a Member  State  and  on 
a recommendation by the Commission based on its analysis, the Council may within 

1  OJ L, 2024/1263, 30.4.2024, ELI: http://data.europa.eu/eli/reg/2024/1263/oj. 
2 

Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of 
the 
ELI: 
(OJ 
deficit 
http://data.europa.eu/eli/reg/1997/1467/2024-04-30). 
Council  Directive  2011/85/EU  of  8  November  2011  on  requirements  for  budgetary  frameworks  of  the 
Member States (OJ L 306, 23.11.2011, p. 41, ELI: http://data.europa.eu/eli/dir/2011/85/2024-04-30). 

procedure 

excessive 

2.8.1997, 

209, 

6, 

p. 

L 

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four  weeks  of  the  Commission  recommendation  adopt  a recommendation  allowing 
a Member State to deviate from its maximum growth rates of net expenditure as set by 
the  Council,  where  (i)  exceptional  circumstances  outside  the  control  of  the  Member 
State, (ii) have a major impact on the public finances of the Member State concerned, 
and (iii) provided that such deviation does not endanger fiscal sustainability over the 
medium term. The Council is to specify a time limit for such deviation. 

The  Heads  of  State  or  Government,  meeting  in  Versailles  on  10-11  March  2022, 
committed  to  bolster  European  defence  capabilities  in  light  of  Russia’s  military 
aggression against Ukraine. These aims were reiterated in  the Strategic Compass for 
Security and Defence. In its Conclusions on European defence of 6 March 2025, the 
European  Council  welcomed  the  intention  of  the  Commission  to  recommend  the 
activation, in  a coordinated manner, of the national escape clause under the Stability 
and Growth Pact as an immediate measure. 
In  its  Communication  of  19  March  20254,  the  Commission  has  invited  all  Member 
States  to  make  use  of  the  flexibility  provided  by  the  national  escape  clause  in  a 
coordinated  manner  with  a  view  to  maximising  the  impact  on  the  EU’s  defence 
capabilities.  This  flexibility  aims  at  facilitating  the  transition  to  higher  levels  of 
defence  spending  provided  that  it  does  not  endanger  fiscal  sustainability  over  the 
medium term. That Communication describes that the activation of the national escape 
clause would allow Member States to deviate from the maximum growth rates of net 
expenditure  as  set  by  the  Council  when  endorsing  the  medium-term  fiscal-structural 
plans or when establishing the corrective paths under the excessive deficit procedure, 
to the extent that this deviation is justified by an increase in defence spending relative 
to the reference year, and that the annual excess through 2028 will not exceed 1.5% of 
GDP.  Increases  beyond  that  amount  would  be  subject  to  the  normal  assessments  of 
compliance.  Such  a  maximum  is  necessary  to  ensure  that  fiscal  sustainability  is  not 
endangered,  while  allowing  all  Member  States  to  benefit  from  the  flexibility  as  they 
move  towards  a  higher  level  of  defence  expenditure.  The  exact  amounts  will  be 
determined  when  outturn  data  become  available,  to  ensure  that  the  additional 
flexibility is used only for its intended purpose. 
The  Council  Recommendation  of  8  July  20255  endorsed  the  net  expenditure  path  of 
Austria.  In  addition,  the  Council  Recommendation  under  Article  126(7)  adopted  on 
the same day6 established a corrective path for Austria to correct the excessive deficit, 
with the same annual and cumulative maximum growth rates of net expenditure. The 
flexibility  provided  by  the  national  escape  clause  will  also  be  considered  in  the 
implementation of the excessive deficit procedure, and when assessing if Austria has 
taken  effective  action.  Therefore,  until  2028,  the  corrective  net  expenditure  path  set 
out  in  the  Council  Recommendation  under  Article  126(7)  of  8  July  2025  is 

Commission Communication (C (2025) 2000 final) of 19 March 2025. 
Council  Recommendation  of  8  July  2025  endorsing  the  national  medium-term  fiscal-structural  plan  of 
Austria (OJ C, C/2025/3958, 20.8.2025, ELI: http://data.europa.eu/eli/C/2025/3958/oj).  
Council  Recommendation  of 8  July 2025  with  a  view  to  bringing  an  end  to  the  situation  of  an  excessive 
deficit 
found  at:  https://economy-
finance.ec.europa.eu/economic-governance-framework/stability-and-growth-pact/corrective-arm-excessive-
deficit-procedure/excessive-deficit-procedures-overview/austria_en. 

in  Austria.  EDP-related  documents 

for  Austria  can  be 

(4) 

(5) 

(6) 

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(7) 

(8) 

complemented by the flexibility that is allowed by the increase in defence expenditure7 
under the national escape clause.  

On  11  December  2025,  Austria  submitted  a  request  to  the  Council  and  the 
Commission, to activate the national escape clause. 

In  its  request,  Austria  sets  out  that,  in  a  context  of  heightened  geopolitical  tensions, 
Russia’s  continued  war  of  aggression  against  Ukraine  and  its  threat  to  European 
security constitutes an existential challenge for the Union, which requires a significant 
increase of defence spending. This situation is an exceptional circumstance outside the 
control of each Member State. Specifically, Austria underlines the purchase of military 
equipment in 2025 given the deterioration of the geopolitical situation throughout the 
year. In light of this, Austria is requesting the activation of the national escape clause 
for the period from 2025 to 2028, in line with the other Member States for which the 
Council has already activated the national escape clause for defence.  

(9) 

In its request, Austria reports data on total defence expenditure until 2026 (Table 1). In 
addition,  Austria  intends  to  safeguard  its  long-term  defence  capabilities  also  after 
2026. Therefore, the increase in defence expenditure has a major impact on the public 
finances of Austria. 

Table 1: Total defence spending in Austria 

General government total 
defence expenditure  
(% of GDP) 

2021 a 

2022 a 

2023 a 

2024 a 

2025 b 

2026 b 

0.6 

0.6 

0.6 

0.7 

0.8 

1.0 

Source: a: Eurostat; b: Information provided to the Council and the Commission by Austria.  

(10)  Austria estimates that the increase in total defence expenditure as a ratio to GDP from 
2021 to 2025 has been in the order of 0.2 percentage points and therefore contributes 
to deteriorating the government balance and increasing government debt.  

(11)  All else being equal, an increase in expenditure over the period covered by the national 
escape clause will lead to higher government debt and a higher deficit by the end of 
that  period.  Indicative  projections  run  by  the  Commission  and  assuming,  by  2028,  a 
linear  uptake  of  the  full  increase  in  government  expenditure  allowed  by  this 
recommendation suggest that the deficit-to-GDP ratio and debt-to-GDP ratio in 2028 
would  be  1.2 pps.  and  1.7 pps.  higher,  respectively,  than  if  net  expenditure  grew  in 
line  with  the  path  set  by  Council  Recommendation  C/2025/3958.  This  would  likely 
require  an  additional  fiscal  adjustment  after  the  period  of  activation  of  the  national 
escape clause in order to meet the requirements of the fiscal framework, including to 
ensure that the debt ratio is put or remains on a plausibly downward path, or stays at 
prudent levels below 60% of GDP over the medium term, and that the deficit stays or 
is  brought  below  3%  of  GDP  and  maintained  below  the  reference  value  over  the 
medium  term.  Austria  acknowledges  that,  going  forward,  structurally  higher  defence 

7  Nationally  financed  defence  expenditure  as  defined  in  the  Classification  of  the  functions  of  government 

(COFOG-02). 

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expenditure may require policies to preserve fiscal sustainability and compliance with 
the  fiscal  rules  over  the  medium  term.  The  limited  projected  increase  in  deficit  and 
debt levels caused by the national escape clause, together with Austria’s commitment 
to  implementing  the  necessary  adjustment  to  fulfil  all  the  requirements  of  the  fiscal 
framework  in  the  next  plan,  ensures  that  fiscal  sustainability  is  preserved  over  the 
medium term. 

(12)  General  government  defence  expenditure  data  are  compiled  and  released  by  the 
national statistical authorities and Eurostat according to the International Classification 
of the Functions of Government (COFOG)8 in the framework of the European System 
of National Accounts (ESA2010)9. These data are appropriate to assess the impact of 
defence  spending  on  government  deficit,  debt  and  net  expenditure,  and  related 
concepts.  Eurostat,  in  close  cooperation  with  the  national  statistical  authorities,  are 
establishing a data collection process. The data collection process needs to be aligned 
with reporting requirements established by Council Regulation (EU) No 479/2009 10. 

(13)  Moreover, for some of the contracts for military equipment signed during the period of 
activation of the national escape clause, delivery may occur at a later stage, therefore 
impacting public finances only after the period of activation of the clause. To cater for 
this  eventuality,  the  flexibility  granted  under  the  national  escape  clause  should  also 
apply  to  defence  expenditure  linked  to  such  later  delivery,  provided  that  the 
corresponding contracts were signed during the period of activation of the clause and 
that this delayed defence expenditure remains within the overall cap mentioned above. 

(14)  The  expenditure  financed  by  loans  provided  under  Council  Regulation  (EU) 
2025/1106  of  27  May  2025  establishing  the  Security  Action  for  Europe  (SAFE) 
through  for  the  Reinforcement  of  European  Defence  Industry  Instrument11,  would 
automatically  benefit  from  the  above  flexibility.  To  this  end,  Member  States  would 
report  to  Eurostat  all  defence-related  expenditures  made  under  the  SAFE  Instrument 
under  the  categories  ‘defence  products’  and  ‘other  products  for  defence  purpose’  as 
defined in Regulation (EU) 2025/1106.  

(15)  This recommendation does not modify the definitions of government deficit, debt and 
net expenditure, and related concepts. Data based on these concepts are to be compiled 
and  reported  by  Austria  in  accordance  with  Regulation  (EU)  2024/1263,  Council 
Regulation (EC) No 479/2009 and Regulation (EU) No 549/2013. 

HEREBY RECOMMENDS: 

1.  During  the  period  2025-2028,  Austria  is  allowed  to  deviate  from  and  exceed  the 
maximum  growth  rates  of  net  expenditure  as  set  by  Council  Recommendation 

8  Manual on sources and methods for the compilation of COFOG statistics — Classification of the Functions 

9 

of Government (COFOG) — 2019 edition. 
Regulation  (EU)  No  549/2013  of  the  European  Parliament  and  of  the  Council  of  21  May  2013  on  the 
European system of national and regional accounts in the European Union (OJ L 174, 26.6.2013, p. 1). 
10  Council Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the excessive 
deficit procedure annexed to the Treaty establishing the European Community (OJ L 145, 10.6.2009, p. 1).  
11  Council Regulation (EU) 2025/1106 of 27 May 2025 establishing the Security Action for Europe (SAFE) 
through the Reinforcement of the European Defence Industry Instrument (OJ L 2025/1106, 28.5.2025, ELI: 
http://data.europa.eu/eli/reg/2025/1106/oj). 

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C/2025/3958 to the extent that the net expenditure in excess of these maximum growth 
rates is not more than: 
(i)   the increase in defence expenditure in percent of GDP since 2021;  

(ii)  provided  that  the  deviation  in  excess  of  the  maximum  growth  rates  of  net 

expenditure does not exceed 1.5 percent of GDP. 

2.   In  the  years  after  2028,  Austria  may  still  deviate  from  and  exceed  the  maximum 
growth  rates  of  net  expenditure  as  set  by  a  Council  Recommendation  in  accordance 
with  Articles  17,  19  or  20  of  Regulation  (EU)  2024/1263,  to  the  extent  that  the  net 
expenditure  in  excess  of  these  maximum  growth  rates  is  related  to  deliveries  of 
military  equipment  contracted  before  end-2028  and  remains  within  the  overall  cap 
mentioned above.  

3.  In accordance with Article 22(7) of Regulation  (EU) 2024/1263, the deviations from 
the maximum growth rates of net expenditure as set by the Council that are allowed by 
this Recommendation will not be recorded as debits in the control account of Austria. 

4.   In order to ensure correct recording of the additional expenditure Austria is to include 
actual and planned data on total defence expenditure (COFOG division 02), including 
on defence investment (COFOG division 02 P.51) and any expenditure to be financed 
by SAFE loans that are not covered in COFOG-02: 

(a)   for  years  T-4,  T-3,  T-2  and  T-1  (with  year  T  being  the  current  year)  in  the 
reporting  to  the  Commission  (Eurostat)  in  accordance  with  Council  Regulation 
(EU) No 479/2009;  

(b)  for  years  2021  through  year  T  (current  year),  in  national  medium-term  fiscal 
structural plans and in annual progress  reports in accordance with Articles 11(1) 
and 15, and 21(1) of Regulation (EU) 2024/1263; 

(c)  for  years  T  (current  year)  and  T+1  in  draft  budgetary  plans  in  accordance  with 
Regulation (EU) No 472/2013 of the European Parliament and of the Council12. 

This recommendation is addressed to Austria. 

Done at Brussels, 

For the Council 
The President 

12  Regulation  (EU)  No  472/2013  of  the  European  Parliament  and  of  the  Council  of  21  May  2013  on  the 
strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or 
threatened with serious difficulties with respect to their financial stability (OJ L 140, 27.5.2013, p. 1). 

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