There has been a heated debate among economists and politicians for years as to whether the EU should take on more unified debt. Already for four decades the EU Commission has been issuing debt instruments to help manage payments under its annual budget. And since the pandemic, and the launch of the Next Generation EU recovery programme, funding volume has shot up so much that the EU Commission has become one of the most prominent issuers on the European bond market.

Finance Minister Christian Lindner and many other politicians have repeatedly emphasised in the past that Next Generation EU is a „one-off exception“. There is increasing reason to doubt this. Recently the EU Commission, supported by the Bundesbank, joined the Eurex derivatives exchange's repo market. The declared aim of this step is to increase the liquidity of EU bond trading on the secondary market.

So much for „one-off exception“. The EU is working flat out to create a professional environment that is attractive to investors, so that it can raise money on the market in the long term. Given the reality of outstanding bonds totalling more than half a trillion euros, and an increasingly professional market environment, the debate about joint EU debt seems to have been overtaken, with increasingly professional marketing, repo access, standardised financing formats, and regular issuance calendars.

There is no doubt that the associated risks of possibly unwanted, difficult to control and non-transparent joint liability for EU partners with less sound budgets are open to debate. What is indisputable, however, is that the EU Commission is clever to organise the capital raising as efficiently as possible for both sides – itself as issuer, and for the investors.

By joining the Eurex Repo Club, the aim of being perceived on the market as comparable to a national government bond – as an „EU federal bond“, so to speak – has come closer. This is significant, as the EU Commission – and thus the citizens of Europe– can benefit from correspondingly more favourable funding conditions.

In addition, the recent accession to Eurex-Repo also represents progress towards a European „safe asset“, as recommended by numerous economists for reasons of financial stability. Finally, from Frankfurt's point of view, the EU Commission's decision in favour of Eurex wins Frankfurt a few significant points in the competition between financial centres.