Valdis Dombrovskis (Riga, 1971) is the European Commissioner for Economy. In the two previous terms, he was Vice President of the European Commission and is one of the most experienced and knowledgeable European politicians in Brussels. Last Wednesday, he presented one of the key economic projects of the European Commission: the simplification of administrative processes that companies must comply with in the framework of decarbonization, a measure through which Europe hopes that companies, especially SMEs, can save up to "6.3 billion euros" and gain competitiveness. This is what has been called "flexibilization" of the green transition in the European capital.
Just a few hours after presenting the initiative, Dombrovskis meets with EL MUNDO, along with four other European media outlets, in an interview where questions about Defense spending, the tools that countries will have to invest more, and the effort that each government will have to make are raised. "All Member States widely recognize that the European Union needs to spend more on Defense, and we will provide additional fiscal flexibility to Member States to do so," he initially responds when asked about Spain's reluctance to accelerate military spending.
When asked again about this point and what immediate spending would be for countries that, like Spain, are below 2% of Gross Domestic Product (GDP) in military spending, the response is much more direct. "It is clear that we will need to spend on Defense significantly more than the current 2% target because the geopolitical and security situation is completely different. We are facing a situation where an aggressor country has openly invaded Ukraine and openly threatens to invade other European countries," he explains, referring to the figure previously suggested by NATO but which will surely be revised upwards at the summit to be held in The Hague in June.
Spain's spending barely reaches 1.29% of GDP, and the government of Pedro Sánchez maintains that it will not reach 2% before 2029, data that are now completely outdated and for which the government is already under pressure to do much more within its own Budget. To allocate more funds, the Commission aims to provide the mentioned fiscal flexibility through the national escape clause. In this way, investment in this area will not be counted in terms of excessive deficit.
"We are no longer in a situation where we could benefit from the so-called peace dividend that existed after the end of the Cold War when we could effectively spend less on Defense because the geopolitical and security situation was not alarming. Now we are in a very different situation," Dombrovskis emphasizes.
Work is also underway for this increased spending on a "European instrument," as the President of the Commission, Ursula von der Leyen, announced earlier this week. In the European capital, no one wants to specify how it will be articulated, although the option of issuing Defense eurobonds that would complement national spending and escape clauses, as well as the possible role of the European Investment Bank (EIB), is gaining strength. The coming weeks will be crucial, as Brussels is accelerating decision-making in a way rarely seen, and by mid-March, the so-called Defense white paper will be published, a sort of European roadmap with immediate actions to be taken in the military field.
The interview with the Commissioner for Economy takes place just a few hours after the President of the United States, Donald Trump, once again threatened to impose a 25% tariff on European vehicles and stated that the European Union was created to "screw" the US. The Commission has taken the position of not reacting or responding to every comment and commercial threat from the magnate, and will wait for them to materialize to take "firm and proportionate countermeasures."
"We take note of and regret President Trump's statement about his intention to introduce tariffs against the European Union. But right now, there are no details about it. From the EU's side, we consider those tariffs to be unjustified and unjustifiable. Furthermore, they would be problematic for economic growth both in the EU and the United States," says Dombrovskis, continuing his analysis of the potential impact of the impending trade war.
"There is a real risk of global economic fragmentation with the imposition of tariffs. According to estimates from the International Monetary Fund, if this economic fragmentation materializes and trade is mainly concentrated within certain economic blocs, global GDP could be reduced by 7% in the medium term. This would be equivalent to removing the combined GDP of Germany and France from the world economic map," he warns.
Moreover, protectionist policies, different armed conflicts, and ultimately, geopolitical instability are already affecting the economies of the EU, the Commissioner anticipates. "We are not conducting the winter economic forecast, returning to the two forecasts per year. But we have made some assessments and we see a slowdown compared to our autumn forecast. I think it is quite evident that the current geopolitical situation and security risks are having implications on both investor and consumer confidence, especially in the Member States," points out the former Latvian Prime Minister.
"In addition, disruptions in the value chain linked to Russia's aggression against Ukraine continue, and tariff announcements by the Trump administration, although largely not yet materialized, are increasing trade uncertainty. It is evident that the current geopolitical situation is having a negative impact on economic growth. And this brings us back to our two main policy priorities established by this European Commission: strengthening our security and enhancing our competitiveness," he concludes.