On 23 July 2026, the European Commission issued a recommendation for a Council Recommendation endorsing Czechia's revised national medium-term fiscal-structural plan for 2027-2030. The plan sets maximum annual net expenditure growth rates of 5.4% in 2027, 2.7% in 2028, 2.4% in 2029, and 2.2% in 2030, with cumulative growth from a 2025 base reaching 20.5% by 2030. The recommendation also clarifies the flexibility allowed under the national escape clause for increased defence spending in 2027 and 2028, as part of the EU's reformed economic governance framework.
The document, published by the Council, outlines that Czechia may exceed the net expenditure growth rates for defence spending up to the lesser of: the increase in defence expenditure as a share of GDP since 2021 minus any flexibility used by 2026, or 1.5% of GDP minus flexibility used by 2026. After 2028, Czechia may still exceed growth rates for military equipment contracted before the end of 2028, within the overall limit. Deviations due to defence flexibility will not be recorded as debits in the control account, and Czechia must report actual and planned defence expenditure in its fiscal reporting and annual progress reports.
The recommendation reinforces the EU's reformed economic governance framework by demonstrating the use of the national escape clause and medium-term fiscal-structural plans. It ensures fiscal consolidation in Czechia while allowing flexibility for increased defence spending, supporting EU security priorities. The plan also sets a precedent for other member states on how to combine fiscal discipline with defence spending increases under the escape clause.
Implementation risks include backloaded adjustment, electoral cycle uncertainties, and reliance on specific fiscal measures like the EET 2.0 system. The enhanced transparency on defence expenditure reporting improves monitoring and compliance assessment. The Council is expected to formally adopt the recommendation following the Commission's proposal.