Portugal cautious on joining EU defence spending surge

Portugal’s Finance Minister, Joaquim Miranda Sarmento, expressed caution regarding the European Union's increasing emphasis on defence spending, revealing the country's reluctance to fully embrace the EU's planned surge in military expenditure.

In an interview with the Financial Times, Sarmento stated that while Portugal is open to utilizing the flexibility of European budgetary rules to boost defence spending, it is determined to maintain a small budget surplus.

"The key word is exactly balance," Sarmento explained in an earlier interview with Jornal de Negócios. "We have to spend more on defence, strengthen the welfare state, lower the tax burden and maintain a balanced budget. In none of these areas can we go faster than this balance requires. But I think it is possible to maintain a balance."

Portugal has already shown progress in improving its financial position, with consecutive budget surpluses in 2023 and 2024, marking the first time in over 50 years that the country has recorded such surpluses. The National Statistics Institute (INE) reported a surplus of 0.7 per cent of GDP in 2024, higher than the anticipated 0.4 per cent. For 2025, the forecast is a smaller, more moderate surplus of 0.3 per cent of GDP.

Sarmento emphasized the importance of maintaining this fiscal prudence, citing the need for Portugal to prepare for potential future economic challenges. "This is the country’s way of guaranteeing a cushion that will leave it prepared for the ‘eventuality of bad economic times arriving in the coming years’," he said.

The European Commission has been pushing for an increase in defence contributions from member states, particularly aiming for a 2 per cent GDP target by 2029. However, Sarmento stressed that while such a target is achievable, it must be balanced with the country’s other financial goals, including reducing public debt and investing in social welfare.

Portugal has yet to decide whether it will activate the national escape clause from EU budgetary rules or make use of the EU’s €150 billion defence fund, which would offer loans to member states for military spending. These decisions will be made in consultation with the Socialist Party, Sarmento confirmed.

By Vafa Guliyeva