The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Auctions of EU-bills and primary dealers to help €750 billion borrowing

The EU will soon have to start funding a €750 billion recovery programme as rates rise and bond markets sell off. Short-dated EU-bills must carry more of the borrowing burden. That requires auctions and a new system of primary dealers.

EU-flags-EU-Commission-Reuters-960x535.jpg
Photo: Reuters

At the end of March, investors were absorbing an intervention by the German Constitutional Court that has delayed that country’s ratification of the €750 billion recovery fund under the NextGeneration EU (NGEU) budget. All 27 member states must ratify this.

The challenge comes from German academics who, it appears, object to the size and extended maturity of EU borrowing to fund economic recovery from the near-term emergency of the pandemic through long-term investments in green and digital technology. The complainants see this as de facto fiscal union.

It is a reminder, suggests Reinhard Cluse, economist at UBS, that any steps toward EU integration and burden-sharing are – and will likely remain – subject to intense legal scrutiny in Germany.

A delay of a few weeks would not disturb investors unduly. But if it were to look likely that Germany will not ratify the NGEU budget, then the turn of sentiment against highly indebted peripheral sovereigns might be sharp.

Carsten Brzeski, global head of macro at ING, and Antoine Bouvet, senior rates strategist, points out: “At this stage, it is impossible to tell how the injunction and a possible lawsuit will evolve.


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

Tags

Peter Lee is Editorial Director. He joined Euromoney straight from Oxford University in 1985, and has written about banking and capital markets ever since, being appointed editor in 1999. He became editorial director of Euromoney in May 2005.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree