The European Commission is asking for more money from Member States, while Hungary has not received the funds it is entitled to.Continue reading
The EU will be owed a record EUR 900bn by 2026, reported the Financial Times. The rapidly rising debt levels are further exacerbated by the fact that bonds issued by the EU are less attractive to borrowers than those available on international markets.
The two largest drivers of European indebtedness seem to be the continuing financial and military aid to Ukraine, Covid recovery initiatives, as well as the bloc’s ambitious green transition. This is not a good news for the Hungarian government as it favors peace negotiations instead of military aid to Ukraine, it has not received any Covid recovery funds from the EU due to political disputes, and it is also against the radical green policies championed by Brussels that would exclude nuclear energy from Europe’s energy supply future, among others.
Germany’s activism-driven radical green policies will require heavy borrowing. Photo: Wikipedia
As the FT reported, EU bonds are now less attractive than those issued by individual members states despite the fact that bond issuance has grown since the 2020 NextGenerationEU program, designed to boost member-states post-pandemic economies. These finance-hungry projects have resulted in an increase from EUR 50bn of debt in issue in 2020, to EUR 450bn in 2023. By 2024 this is expected to rise to EUR 500bn, and finally to EUR 900bn in 2023.
Despite the EU’s AAA credit rating, member states are not borrowing its bonds at the most favorable terms. The current 10-year EU bonds trades with a yield of 3.6 per cent while, for instance German bonds are at 2.8 percent, and even France, that has a lower AA rating, is able to issue them at a lower 3.4 percent.
Via FT; Featured image: Facebook/European Commission