Spending more on defence without damaging social spending – time for a coalition of the borrowing?

NATO’s commitment to sharply increase spending on defence and security presents a daunting fiscal challenge for many European governments.

Our Professorial Research Fellow, Professor Iain Begg, asks whether a “coalition of the borrowing” that enables countries to raise debt collectively could provide the solution.

Unless growth defies current projections by rising substantially, spending on defence and security, especially within Europe, may require politically difficult decisions on cutting healthcare and welfare spending. A partial solution would be better welfare to work programmes that boost employment rates and thus the tax base. But additional money will have to be found in many countries to forestall fiscal crises.