In 2024, the EU’s general government deficit modestly declined to -3.2 % of GDP. Despite this, 11 Member States reported deficits exceeding 3 % of GDP, and eight remain under an excessive deficit procedure. Projections indicate the EU deficit will rise to -3.4 % by 2026, driven largely by increased public sector investment, particularly in defence. In a dedicated analysis, the Commission indicates that increasing defence spending to 1.5 % of GDP by 2028 would raise real GDP by 0.5 % above baseline levels but also increase the EU’s debt-to-GDP ratio by 2 percentage points. While investments in defence R&D and infrastructure could enhance long-term GDP growth, high import reliance would dampen the economic boost. The impact largely depends on factors like production capacity limits and uncertain R&D benefits.
The EU’s debt-to-GDP ratio, having fallen by 9 percentage points from its COVID-era peak, is now projected to rise again, reaching 84.5 % by 2026 after stabilising at approximately 82 % — three points higher than pre-pandemic levels in 2019. However, public debt levels and trajectories across Member States show considerable variation, with some high-debt countries achieving remarkable reductions in their debt-to-GDP ratios. With the new economic governance rules entering their first full annual cycle of implementation, eight EU countries are presently subject to an excessive deficit procedure, while Austria is expected to come under closer examination soon.
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