The EU’s debt pile is set to reach 900 billion euros by the end of 2026 as the bloc borrows to fund coronavirus recovery programs and support for Ukraine, but investors are finding its bonds less attractive than some of those of individual European countries, XQ informs referring to the Financial Times.
The bloc’s own bond issuance has grown since member states reached a historic 2020 agreement on common debt issuance for its NextGenerationEU program, designed to help economies recover from the pandemic and support Europe’s green and digital transition.
From a low base, the EU has rapidly become a “real player” on debt markets, an EU official said.
“By the end of 2026, we will have 900 billion euros [of debt] outstanding,” the official added. “That stock of debt requires refinancing: we’ve got to make this market work because of that.” A debt pile of this size would make it the fifth largest in the EU.
However, Brussels’ ambitions to be an issuer on a par with individual European countries are being hampered by political reluctance to continue widescale debt issuance beyond 2027 and the bonds’ exclusion from sovereign indices. This has left investors uncertain over how big the market will be in future.
The EU has 450 billion euros of debt in issue, a huge increase from about 50 billion euros in 2020. This is set to rise past 500 billion euros next year, as it funds pandemic recovery programs, green investments and support for Ukraine, and reach 900 billion euros by the end of 2026, officials said.
The bulk of the funding relates to NextGenerationEU, which will be up to 800 billion euros in size and is set to end in 2027, with other borrowing relating to funding for Ukraine.
