Fiscal aspects of European defence spending: implications for euro area macroeconomic projections and associated risks

EU government spending on defence is expected to increase in response to heightened geopolitical tensions. This increase underpins efforts towards reaching a higher NATO defence spending commitment, as agreed at the NATO summit of 24-25 June. This box explores the implications for the euro area baseline projections and the risks around the baseline, as reflected in the June 2025 Eurosystem staff macroeconomic projections.