Brussels is intensifying its push for greater financial sovereignty, with a renewed focus on the issuance of Eurobonds to fund critical investments in defense, infrastructure, and economic resilience. The debate, long simmering within the European Union, has gained urgency amid growing concerns about the reliability of the United States as a security partner and a desire to bolster the euro’s standing on the global stage.
Spanish Economy Minister Carlos Cuerpo recently made a forceful case for Eurobonds in an opinion piece published in the Financial Times, arguing that the time to create a “true safe asset” for Europe has arrived. Cuerpo contends that a larger, more liquid Eurobond market would lower borrowing costs, stimulate investment, and elevate the role of the euro as a global currency. He frames the move as essential, stating it’s time to “cross the Rubicon” in establishing financial independence.
The impetus for this renewed push stems from a shifting geopolitical landscape. Recent developments, including European troop deployments to Greenland to assert sovereignty, have underscored a perceived need to reduce reliance on the United States, particularly given concerns about potential shifts in U.S. Foreign policy under a future Republican administration. As one source noted, the U.S. Has “morphed into a threat” requiring Europe to proactively secure its own interests.
The concept of Eurobonds – jointly issued debt backed by the collective creditworthiness of EU member states – is not new. The EU already utilizes a form of joint borrowing, exemplified by the €90 billion loan package agreed upon in December to support Ukraine. This loan, financed through capital markets and backed by the EU budget, demonstrates a willingness to pool resources, although Hungary, Czechia, and Slovakia were exempted from the policy. However, the scale of these initiatives pales in comparison to the potential of a fully realized Eurobond market.
The precedent for large-scale joint borrowing was set with the NextGenerationEU recovery plan, launched in response to the COVID-19 pandemic. This plan authorized up to €700 billion in common borrowing, a move initially met with resistance from fiscally conservative nations like the Netherlands and Germany. These countries expressed concerns about effectively subsidizing more indebted southern and eastern European economies. The severity of the economic shock and the recognition of shared risk compelled reluctant member states to capitulate.
Currently, the outstanding amount of EU-issued bonds stands at approximately €1 trillion, a figure dwarfed by the nearly $30 trillion in U.S. Treasury bonds in circulation. The combined value of Eurozone sovereign bonds with AAA and AA ratings only reaches around €7 trillion, insufficient to meet global investor demand. This fragmentation of European debt markets hinders the continent’s ability to compete with the United States in attracting long-term capital.
Cuerpo’s proposal centers on significantly expanding the Eurobond market by , aiming to create a security large and credible enough to establish Europe’s financial sovereignty. He emphasizes the opportune moment, noting that the euro has appreciated by 15% against the U.S. Dollar since , yet these gains haven’t translated into commensurate strategic benefits, such as cheaper financing and increased financial stability.
The argument extends beyond simply lowering borrowing costs. A robust Eurobond market would provide a safe haven for global investors seeking stable, liquid assets, particularly as portfolios diversify away from traditional safe havens. Europe, with its strong institutions and commitment to the rule of law, is well-positioned to attract this capital. However, Cuerpo cautions that incremental steps won’t suffice; a decisive commitment and a substantial scale are necessary to build market confidence.
The challenge lies in achieving the necessary political alignment. The next EU budget cycle, beginning in , is identified as a critical deadline. Successfully launching a significant Eurobond initiative will require a unified front from member states, overcoming historical divisions and addressing concerns about risk-sharing and national fiscal autonomy. The debate is no longer simply about economic policy; it’s about Europe’s ability to chart its own course in an increasingly uncertain world.
The broader context, as highlighted by the Peterson Institute for International Economics, is the need for Europe to achieve “strategic autonomy” across multiple dimensions, including military and financial independence. While bolstering defense capabilities is receiving considerable attention, establishing a competitive European financial ecosystem is equally crucial for long-term economic security and global influence.
