The Institutional Issue of the EU's Borrowing Costs

In recent years, European Commission borrowing on behalf of the European Union has changed significantly in both scale and nature. This is mainly due to the financing of the Support to mitigate Unemployment Risks in an Emergency (SURE) and NextGeneration EU (NGEU) instruments introduced in response to Covid-19.

For the first time, the EU is now faced with its own debt, which will have to be paid for through the EU budget. When these programmes were launched, interest rates were at historic lows. However, they have since risen rapidly, both in absolute terms and as compared to sovereign borrowers like Germany and France.

In this episode of The Sound of Economics, Maria Demertzis invites Grégory Claeys and Conor McCaffrey to discuss the causes of this rise in EU borrowing costs, as well as its wider implications on the EU budget, indicated in their latest paper.

Relevant piece: Claeys, G., C. McCaffrey and L. Welslau (2023) ‘The rising cost of European Union borrowing and what to do about it’ Policy Brief 12/2023, Bruegel