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The EU’s debt pile is set to reach €900bn by the end of 2026 as the bloc borrows to fund coronavirus recovery programmes and support for Ukraine, but investors are finding its bonds less attractive than some of those of individual European countries.
The bloc’s own bond issuance has grown since member states reached a historic 2020 agreement on common debt issuance for its NextGenerationEU programme, designed to help economies recover from the pandemic and support Europe’s green and digital transition.
From a low base, the EU has rapidly become a “real player” on debt markets, an EU official said. “By the end of 2026, we will have €900bn [of debt] outstanding,” the official added. “That stock of debt requires refinancing: we’ve got to make this market work because of that.”
A debt pile of this size would make it the fifth largest in the EU. However, Brussels’ ambitions to be an issuer on a par with individual European countries are being hampered by political reluctance to continue widescale debt issuance beyond 2027 and the bonds’ exclusion from sovereign indices. This has left investors uncertain over how big the market will be in future. “The big question for the market is: was NextGenerationEU a one-off or is that kind of co-ordinated fiscal response now the template?” said Rohan Khanna, head of euro rates strategy at Barclays....
more at FT