EU Makes New History... Plans to Announce First Ever EU Bond Issuance on the 14th

Funding Target of 806 Billion Euros by 2026... To Be Used as Financial Resources for Post-COVID-19 Economic Recovery Measures

[Image source= Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] The European Union (EU) appears to be taking a significant step closer to the goal of a European community.

Bloomberg News reported on the 13th that the EU’s first-ever bond issuance is imminent, and the EU will officially announce related details on the 14th (local time).

Based on a draft obtained in advance, Bloomberg stated that the EU aims to issue its first bonds in June and plans to establish a platform utilizing the latest technology by September to sell bonds to major banks. The European Commission is expected to announce plans for bidding on bonds with maturities of less than one year with the first EU bonds on the 14th.

Furthermore, once the platform is established, the EU plans to issue bonds with maturities ranging from 3 to 30 years from this year through 2026, raising €150 billion to €200 billion annually, totaling €806 billion. Of the €806 billion, up to €250 billion is expected to be raised through the issuance of green bonds.

The funds raised will be used as resources for the economic stimulus plan called "NextGenerationEU (NGEU)." NGEU is a recovery plan for the European economy following COVID-19, and the EU is issuing bonds to secure funding for this plan.

Bloomberg explained that the EU’s entry into the bond market is highly significant. It also reported that EU bonds could become a competitor to U.S. Treasury bonds as safe assets within a few years. Additionally, EU bonds are expected to strengthen the European integration movement and the euro.

During the Eurozone debt crisis in 2012, discussions about issuing Eurozone bonds under the name "Eurobonds" were actively conducted. However, Germany strongly opposed the issuance at the time, causing the Eurobond issuance to fail, and no significant progress was made afterward. Due to the size of its economy, Germany would have had to bear the greatest financial burden for Eurobond issuance. Then-German Chancellor Angela Merkel refused to issue Eurobonds, stating that Germany could not use its finances to support countries in debt crises such as Greece, Spain, and Italy. Coincidentally, with Chancellor Merkel officially announcing her retirement from politics this September, the issuance of European bonds has made significant progress.