Don’t change horses in midstream – How to make NGEU bonds the euro area’s safe asset

The bonds financing the European Union’s recovery remain short of being the much-hoped-for safe asset of EU monetary union (EMU). However, with the right reforms they could well turn out to be just that. To earn safe asset status, the volume of EU debt should increase, EU borrowing made permanent, and the ECB treat supranational EU bonds in a more favourable manner. The flaws associated with failing to be a eurozone-only instrument are offset by remarkable fiscal and democratic benefits. So, if the NextGenerationEU (NGEU) pilot project – limited in time and tailored specifically to fighting the coronavirus pandemic – turns out to be to everybody’s benefit, then member states should seize the opportunity and extend it before debt is repaid as of 2028.

Image: CC Markus Spiske, Source: Unsplash