The Brief – The European ‘Debt’ Union
Source: Euractiv
The Brief will go on a break over the holidays. The next issue will land in your inboxes on 5 January.
Last week the EU proved once again that it is most effective when no one’s looking – preferably in the middle of the night before a major holiday.
We’re referring, of course, to Thursday’s deal to secure funding for Ukraine. While much ink has been spilled castigating Belgium for resisting the Commission’s ‘reparations loan’ scheme, relatively little attention has been given to the €90 billion grant the EU agreed to extend to Kyiv through common borrowing.
What’s €90 billion among friends? Not long ago, such sums were the stuff of existential wails in some corners of the EU, especially in Germany.
Following the outbreak of Greece’s debt crisis in 2010, European leaders spent months veering from one crisis summit to the next, while debating whether and how to stave off a sovereign default.
Their main concern wasn’t Greece – which many resented for years of ‘creative accounting’ – but the stability of the euro, which looked like it might collapse.
The most charged exchanges involved the question of issuing joint European debt – ‘eurobonds’.
Germany and other spendthrift countries considered eurobonds the road to perdition. Using joint debt to bail out Greece would set a dangerous precedent that would ultimately saddle Germany with the obligations of the ‘Club Med’ countries, the argument went.
In the end, the eurozone countries bailed out Greece directly, with bilateral loans, and then indirectly, via what they called the European Financial Stability Facility (EFSF), a Luxembourg-based special vehicle established to lend Athens €80 billion, and ultimately through a new bailout fund, the European Stability Mechanism.
Germany insisted all along it wasn’t agreeing to eurobonds, but in effect it had done just that.
The bailouts of Greece and other eurozone members were followed by the COVID recovery fund disbursements and have saddled the EU with more debt than anyone would have dared fathom in 2010. Today, the EU’s total obligations total €670 billion, making it the fifth-largest sovereign or supranational borrower in Europe, according to Círculo de Empresarios, a Madrid-based think tank.
What makes this development particularly noteworthy is not only that the EU was virtually debt free 15 years ago, but that the bloc’s transformation into the ‘debt union’ Germany and others so feared, has occurred with little to no public debate.
Did EU leaders do the right thing last week to keep Ukraine afloat? Yes.
Yet by deciding without any public scrutiny to inflate the EU’s debt to do so, is a decision they may soon regret.
Round up
Council delays Mercosur vote again – A key vote to confirm a deal on new safeguards with Mercosur countries has been delayed again, after the Danish presidency on Monday cancelled a meeting of EU ambassadors at the last minute. It had been pencilled in since Friday as a final attempt to settle Mercosur discussions, including rubber-stamping a safeguard designed to protect EU farmers from potential market distortions linked to imports from agri-powerhouses Brazil and Argentina.
Europe’s quiet debt revolution – For decades, Brussels prided itself on fiscal restraint. Today, it sits among Europe’s biggest debtors. A position that will be worsened by last week’s EU decision to grant Ukraine €90 billion in financial support over the next two years, argues Christian Chase in this opinion piece.
New Chinese duties on EU dairy – Beijing imposed a new round of tariffs on the EU’s food sector on Monday, announcing temporary duties on some dairy products from Tuesday. The new duties range from 21.9% to 42.7%, though the final decision will be made only after the probe concludes in February.
Across Europe
Israel, Greece and Cyprus revive trilateral talks – The leaders of the three countries met on Monday in Jerusalem for the first time in two years, amid renewed concerns over Turkey’s regional ambitions. The revival, coming just days before Cyprus assumes the rotating EU Council presidency, is being closely watched in Ankara, where officials fear the trio could tilt the regional balance of power.
Italy fines Apple €98 million – The Italian competition authority has fined US tech giant Apple on Monday for allegedly breaching competition rules via its so-called App Tracking Transparency. An Apple spokesperson said that the company would appeal the decision.
Record number of drones in Germany – More than 1,000 suspicious drone flights, the majority over military facilities, defence companies and critical infrastructure, were registered in Germany in 2025. Most of the drone sightings in the country affected “military facilities, airports, but also other critical infrastructure – such as defence companies and port facilities,” according to the Federal Criminal Police Office.
(vib, mm)
The original article: belongs to Euractiv .
