How can the EU issue debt to finance EU public goods?

Publishing date
18 September 2023
Armin Steinbach
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Policymakers are increasingly attracted to the concept of European public goods. The EU's need to galvanise resources for critical and emerging green and digital technologies has recently led the European Commission in 2023 to propose a Strategic Technologies for Europe Platform. At the same time, the Union remains dependent on own resources which are funded by the member states.  

NextGenerationEU (NGEU) as a response to the pandemic has pioneered EU debt-financing and it has given EU borrowing a new quality in terms of magnitude and in terms of legal design. Building on this experience, it is important to investigate legal avenues for the EU to borrow on the capital market to finance public goods.   

The NGEU could be replicated but would remain exceptional in the sense that no permanent EU tasks could be financed through NGEU-like funds. The legal analysis shows that the EU could even debt-finance its regular budget. Clearly, this would be subject to constraints as the EU does not enter capital markets as a sovereign state. A core limitation is that the EU must have adequate means to meet its debt service in any year. Within this constraint, the EU has leeway regarding the ‘spending’ of borrowed funds, allowing the EU to spend with the purpose of, inter alia, climate funding, cohesion policy, infrastructure, or research.  

Financing other EU public goods has become compelling, given the magnitude of potential funding gaps in the areas of climate, security and social policy. EU borrowing adds a new layer of financing adding to the existing Member States-dependent resources.  

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About the authors

  • Armin Steinbach

    Armin Steinbach is a non-resident fellow at Bruegel as well as Jean Monnet Professor of Law and Economics at HEC Paris and Research Affiliate at the Max Planck Institute for Research on Collective Goods in Bonn.

    Previously, Armin held academic posts at Oxford University, European University Institute Florence, University of St. Gallen and Harvard University. He served as civil servant in the German Ministries of Finance and of the Economy as well as in the German parliament. He practiced as lawyer with Cleary Gottlieb Steen & Hamilton in Brussels and at the World Trade Organization (WTO) in Geneva. The WTO lists him as panelist serving the WTO Dispute Settlement Body.

    Armin has been a contributor and commentator to Financial Times, BBC, Bloomberg, CNBC, Le Monde, Les Echos, Frankfurter Allgemeine Zeitung, Die Zeit, and Handelsblatt.

    Armin obtained his Habilitation from University of Bonn. He holds a Doctor of Laws from University of Munich, Doctor of Economics from University of Erfurt, and Master in Economics from Humboldt University Berlin.

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