Overview
- The European Commission formally proposed the change on Wednesday, allowing certain state energy-transition and energy-security measures to be excluded from deficit calculations as part of its Spring fiscal assessments.
- The proposal sets strict numeric limits: up to 0.3% of GDP per year and 0.6% of GDP over three years for 2026–2028, drawn from the existing 1.5% of GDP defence exception rather than as extra room.
- Only measures that reduce dependence on imported fossil fuels qualify and direct fuel tax cuts are explicitly excluded, but the Commission has not yet published the detailed rules that will determine which programmes count.
- The move follows pressure from Italy, which sought roughly €7 billion of extra budget space for energy aid, and it has immediate fiscal effects such as Germany avoiding a deficit procedure after defence exclusions were applied.
- Brussels officials warn the change could set up competition between energy and defence spending and complicate the Stability and Growth Pact’s aim of medium-term debt reduction, with formal implementation and governance still to be defined.