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Higher defence spending and its impact on household expectations

Author

Listed:
  • Baumann, Adam
  • Checherita-Westphal, Cristina
  • Kocharkov, Georgi
  • Osterloh, Steffen

Abstract

This box examines euro area household perceptions of rising defence spending, a trend reinforced by EU governments’ commitments at recent security discussions. According to the May 2025 ECB Consumer Expectations Survey, 81% of households anticipate increased defence spending within the next year. Public debt is seen as the most likely source of financing, followed by cuts in other spending and tax hikes. Households predict a slight increase in inflation in response to higher defence spending, while their expectations on growth are more varied. They expect their financial well-being to stay largely the same, suggesting that increased defence spending will not have a strong impact on their propensity to spend. JEL Classification: D12, E62, H56

Suggested Citation

  • Baumann, Adam & Checherita-Westphal, Cristina & Kocharkov, Georgi & Osterloh, Steffen, 2025. "Higher defence spending and its impact on household expectations," Economic Bulletin Boxes, European Central Bank, vol. 5.
    • Handle: RePEc:ecb:ecbbox:2025:0005:
    Note: 1790315
    as

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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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