For several decades the European Union has not only existed but also looking for more funds, every single year. One of the methods that it desires most is Eurobonds (bonds issued by all member countries, for which all are individually responsible*). We will endeavour to shine a light on these bonds.

Financial union without a political one

The heart of the problem lies in that there never was a union when it comes to policy; just a few dozen countries who are forced to work toghether in the same currency. This creates the problem that you cannot adjust any meaningful rates (only some interest rates, for which large lenders do have alternatives).

Normally any country can decide to freely float its currency, allowing exchange rates to alleviate some of the damage from economic hardship. In the EU you cannot do this, whilst also having to deal with a rather fixed spending ceiling, of which enforcement is not based on breeching it but on whether or not the high lords like you. Which creates a unlevel playing field from the get go. We have decided to not explain what enforcement is based on, to avoid spreading incorrect information: Legislation can change, so can the personal relationships of ruling bureaucrats.

There also are rules considering state sponsorship, which again limit what you can spend, in support of home grown companies or companies that you want to grow. Again, enforcement of rules is not based on the rules themselves in this either.

The above does mean that to issue Eurobonds, a group of countries has to agree on them, and also they must believe that their political careers will not be too damaged by doing so. They then have to agree on the financial parts; such as distribution and how to repay for them.

Trade union

There is one upside to the EU, which can help in issuing bonds: It has an internal market with a lot of activity. Not only is this a source of growth for all members, it also creates a large pool from which they can collect taxes and such, to potentially pay for interest on bonds. Now, taxing internal activity does reduce growth, thereby directly damaging its only positive factor.

Off course, the trade union does highlight why we do not have Eurobonds to begin with: Free movement of goods and -of capital are not the same thing. Capital is free moving, but does require one to open bank accounts and meet criteria of local governments. By removing capital barriers, the idea of a single European market would become more engrained in the minds of citizens, which would make bonds easier to sell.

Remaining mistrust from the Euro

To understand why the author is so mistrusting of Eurobonds and why it is likely a very bad idea, please consider the following: When the Euro was introduced, our salaries and assets were all adjusted in price (read, less than halve remained), but only part of the prices in shops were reduced. Contracts were initially also reduced, mostly, but it was much easier for companies to increase these rates then for workers to increase their salaries. This resulted in a severe drop in purchasing power, from which some are yet to recover, over two decades later.

Initial coin and paper money releases were also of low quality: Inner and outer circles of coins were not fully attached and bills could be torn simply by looking at them.

The author`s country biggest and therefor heavier, more valuable seeming, coin was also replaced by a small piece of paper, though not relevant in real world value, it does act as a negative psychological factor. The intrinsic value does obviously reduce, from a bit of metal to worthless paper.

Further information

Should be noted that the EU has issued debt in the past, such as during the Covid-19 years. This can be used as both basis and precedent to issue further debt. Also the ongoing, at time of writing, war in the Ukraine is something for which joint funds have been created but not debt. There are countless projects on which the EU countries have joint together and as such the author believes any genuine difficulty concerning Eurobonds to be politicians attempting to look good in the media: They can and will issue them whenever their pleasure desires it. With emphasis on pleasure and not any genuine real world need for them.

In conclusion

Above we have stated that the EU already is able to raise funds, including debt, so Eurobonds are in fact happening right now. This has happened without real resistance or, from the sceptic countries, serious consequences; therefor sovereignty of those countries is in fact diminished and possibly lost, as they are stuck with the bill for other countries.

 

*The details of who is responsible for what (on paper) has been subject of debate, but no one truly believes that rich countries are not liable for the debt of poor countries: Debt of poorer EU countries, mostly Greece, has been paid for by the citizens of rich EU countries,  largely Nort-West EU countries but mostly by size of population The Netherlands, during a crises following events of the 2007 credit crunch. Those citizens are not likely to ever so that money returned to them or even their national coffers.