The New Era of Leveraging the EU's Fiscal Space for Common Borrowing

Abstract

To allow for large-scale common EU borrowing of over €1 trillion for NextGenerationEU, SURE, SAFE and assistance to Ukraine, the EU significantly adapted its legal framework since 2020, consolidating national borrowing capacity with centralized EU debt issuance. This article examines the main features of this new era of common EU borrowing, detailing both the legal and financial architecture underpinning this policy. Financially, EU borrowing aims to achieve better market access and enables tax smoothing, making assistance viable only as long as it improves the fiscal position of the Member States. Legally, the EU has created an elaborate system of guarantees and secondary laws to assure creditors that it is legally obliged, able and financially capable of honouring its debt. The article also discusses the financial implications of borrow-to-spend instruments on the budget, and the legal adjustments in the current and future Multiannual Financial Framework designed to meet financing needs for these borrowing costs.