Lithuania seeks defence leeway as deficit climbs

Lithuania wants more time and more room under the EU rule that lets it spend extra on defence. Finance Minister Taurimas Valys says he has asked European Commissioners to extend the current flexibility beyond 2028 and lift its ceiling of 1.5% of GDP (gross domestic product, the value of everything the economy produces in a year), though he has named no new figure or end date (BNS via TV3). His own draft budget explains the request: it projects a deficit (the gap between what the state spends and what it collects, covered by borrowing) of 3.8% of GDP in 2027 and 4.6% in 2028, above the EU's 3% threshold (Finance Ministry).

Crossing that line matters. Above it, Brussels can open a formal procedure that presses a government to bring its borrowing back down.

A budget pulled two ways

The draft, approved by the government on 16 October, gives defence €4.8 billion in 2027, or 5% of projected GDP, slightly more in euros than this year but a smaller share of the economy than 2026's 5.38% (LRT, Finance Ministry). So the army's slice is shrinking relative to the economy, yet the deficit still grows.

Defence is only one claim on the money. The same draft raises public-sector pay, pensions and family benefits, with about €1.8 billion more going to social security (Finance Ministry). On 6 October, Lithuania's independent budget watchdog warned that the defence room the EU had already granted was essentially used up (Lrytas).

What the EU rule changes, and what it doesn't

Every EU government has an agreed limit on how fast its spending may grow each year. The "national escape clause" for defence lets a country go over that limit, but only to pay for extra defence (Council recommendation). It is permission to spend, not EU money.

Lithuania won approval on 8 July 2025. Until 2028, it may overshoot its spending limit by whichever is smaller: the rise in its defence spending since 2021, or 1.5% of GDP (Council recommendation). Eighteen countries have activated the clause so far, and none has received a higher ceiling (Council).

The clause only changes how Brussels judges Lithuania's spending growth. It does not shrink the deficit. Tanks and barracks still count in it, and the borrowing behind them still adds to debt, so a deficit above the threshold stays above it whatever the cap.

The Commission has estimated what the existing relief costs if Lithuania uses all of it. Compared with the plan Lithuania would have followed without the clause, its 2028 deficit ends up 1.3 percentage points of GDP higher and its debt 2.7 points higher (Commission). That estimate describes the cap Lithuania already has, not the larger one Valys wants.

Who ends up paying

Part of next year's defence money prepares Lithuania to host a German brigade, alongside building its own army division (LRT). Vilnius can reasonably argue that foreign troops stationed on its territory serve allied security, not only its own. The clause does nothing to share that bill. It grants leeway, so the borrowing stays in Lithuania's accounts.

The cost also does not end in 2028. The IMF expects Lithuania's defence and ageing costs (pensions and health care for an older population) to keep running, and says they will require higher revenue or cuts elsewhere (IMF).

No document shows other governments backing a higher cap, and no Commission proposal to raise it exists. The Commission delivers its formal opinion on the draft budget in November (Commission).

This is still a draft budget, and Valys has not said what cap or end date he wants. Even so, the Commission's own figures support a firm conclusion. A bigger or longer clause would buy Lithuania time under the EU's spending rule, but it would not pay for a permanently larger army. That cost falls on Lithuanians, through more borrowing now or through tax and spending decisions in the budgets that follow this one.