Spending more on East European defence will be tough

Significance

Russia’s war in neighbouring Ukraine has prompted EU member-states, and the Visegrad Four (V4: Czechia, Hungary, Poland and Slovakia) in particular, to rethink their own financial commitment to NATO. However, the various consequences of that war have also hammered the V4 economies, limiting their fiscal options.

Impacts

• Slowing V4 economies this year and falling demand from European trading partners could put both fiscal revenues and defence pledges at risk.
• A renewed Russian offensive could prompt rash military spending and economic uncertainty, hampering expenditure and revenue calculations.
• Fiscal stress will highlight low V4 rates of EU fund absorption, due partly to delays in eligible projects.