Germany and its traditionally frugal allies in the EU — including Austria, Denmark, Sweden, Finland, and the Netherlands — have long been champions of fiscal discipline, pushing against higher spending, joint debt, and budgetary flexibility. However, recent shifts in global and European geopolitics, such as the war in Ukraine and concerns over European security, are causing cracks in this united front.
The growing need for defense spending and greater EU sovereignty, particularly in response to external threats like Russia’s invasion of Ukraine and a potentially diminishing U.S. commitment to NATO, has prompted some traditionally budget-conscious countries like Denmark and Finland to reconsider their positions. Denmark’s Prime Minister Mette Frederiksen notably signaled a shift in January by advocating for increased defense spending and a more flexible approach to EU budgets, including considering state aid and the possibility of joint EU debt for defense. This represents a stark departure from Denmark’s prior stance of skepticism toward deeper EU integration and cooperation on joint debt.
Despite this change, the frugal alliance remains divided. Countries like Germany and the Netherlands are still staunchly opposed to the idea of joint debt for defense, while some Nordic and Baltic countries are now more willing to embrace such measures. The future of the frugal coalition will be tested in the upcoming EU budget negotiations, particularly with the 2028-2034 budget on the horizon. While countries like Finland and Estonia have warmed to the idea of shared EU defense funding, others, including Austria, are likely to resist, especially if the far-right party gains power.
Moreover, the frugal group still maintains a strong influence over EU regional funding, which links financial support to structural reforms in Southern and Eastern Europe. However, the shift in priorities toward security could create a new coalition of countries like Poland and other Eastern European nations, pushing for a stronger focus on defense and resilience.
The key to the future of the frugal coalition may lie with Germany. If Germany, the EU’s largest and most influential country, shifts its stance toward more spending, especially for defense, other traditionally cautious countries may follow suit. However, if Germany remains steadfast in its opposition to increased spending, the frugal alliance could retain its influence in EU budget talks, keeping the push for fiscal discipline alive.