Abstract
Although the new EU fiscal rules improve the macroeconomic logic and differentiation, they offer very little leeway for urgently needed, debt-financed defence spending. However, the EU Commission‘s proposal to solve this via flexible escape clauses undermines the credibility of the rules. A new reform is necessary: defence spending above 2% of GDP should be exempted for a limited period of time and growth-promoting investments in countries with moderate levels of debt should be facilitated. This is the only way to reconcile security, fiscal stability and regulatory compliance in the long term.