Europe joint debt case gains support as ECB's Patsalides urges policy shift

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Europe joint debt policy shift

Highlights

ECB Governing Council member Christodoulos Patsalides urges Europe to support joint borrowing, aiming to issue a large common safe asset for sovereignty and stability.
Patsalides argues a common European benchmark debt instrument could lower financing costs, deepen euro capital markets, and facilitate investment in shared EU priorities such as green and digital transitions.
A broader supply of liquid, safe euro-denominated assets would enhance the euro's global reserve currency status, provided joint issuance is separated from subsequent spending decisions.

Push for a common European safe asset

As reported by Reuters, European Central Bank Governing Council member Christodoulos Patsalides says Europe should abandon its long-standing political resistance to joint borrowing because a large common safe asset would reinforce the bloc's sovereignty and stability.

Europe has debated joint issuance for years as a way to create a benchmark instrument that could compete with U.S. Treasuries. Resistance has remained strongest in countries such as Germany and the Netherlands, where concerns persist that national taxpayers could end up bearing the cost of weaker fiscal discipline elsewhere.

Patsalides, who also serves as Cyprus' central bank chief and says his country holds the EU's rotating presidency, argues in an opinion piece that economic, geopolitical and institutional conditions now align in favor of a common European safe asset. He says the instrument could provide the scale and lower financing costs needed to fund shared projects including green and digital transitions, AI programs, health preparedness and defence.

Capital markets and euro role in focus

He argues that joint debt issuance could create wider market benefits by establishing a pricing benchmark, a collateral base and a deep liquidity pool, all of which are necessary for a better functioning capital market. In his view, that structure would also help channel Europe's large household savings into more productive investment across the bloc.

A deeper and more liquid European capital market anchored by a common benchmark asset would support larger institutional pools of capital, facilitate long-duration investment and reduce cross-border financing costs, he says. Patsalides also contends that a larger supply of liquid and safe euro-denominated assets would strengthen the global role of the euro, since reserve currencies depend on scale and dependable market depth.

To make the model work, he says Europe should separate issuance from spending. Under that approach, debt issuance would build the safe asset market while spending decisions would direct the capital toward common policy objectives.

Our earlier report on Europe’s competitiveness pressures examined how persistently high energy costs are intensifying calls for faster EU deregulation and deeper single-market integration. It highlighted warnings from industrial leaders that delayed reform could hurt growth and employment, while “Made in Europe” style measures risk raising costs for companies facing tougher global competition.

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