Ettore Dorrucci and Stefano Rossi
Europe’s experience with the issuance of supranational debt backed by national sovereigns has spanned over seven decades by now. Despite differing aims and designs, joint borrowing initiatives have respected clear boundaries: only temporary issuances to finance new expenditure in response to crises or ad-hoc needs, no debt mutualisation, no common Treasury with a permanent fiscal capacity, no transfer union. This paper argues that groundbreaking geopolitical and macro-financial shifts call for reassessing at least some of these boundaries, today. In a world where the new normal is competition and confrontation with predatory superpowers along with frequent systemic shocks, joint borrowing could finance European Public Goods (EPGs) essential to Europe’s autonomy and resilience – and do so, for the first time, on a permanent, strategic basis. We explain how a ‘coalition of the willing’ open to future entrants could make headway through ad hoc intergovernmental arrangements, going beyond Treaty-based boundaries and taking account of the broader context in which joint borrowing needs to take place. We also explore whether, in this changed context, there may be scope – and under which conditions – for partial replacement of national debt with new European instruments with joint-and-several guarantees so as to foster financial market integration and the emergence of a genuine European safe asset. A proposal it outlined to this aim. Ultimately, progress toward the next generation of joint borrowing in Europe will hinge not on legal design but on political will, fiscal discipline, and mutual trust – a pragmatic path toward deeper European sovereignty.
