The EU has transformed from an international organization to an autonomous legal regime with supremacy and direct effect. However, in economic terms, the Union never fully emancipated – it remains dependent on Member States in securing funding to fulfil its objectives. Against that backdrop, this article explores the legal leeway for two avenues of financing the EU through the issuance of public debt. The first is a replication of Next Generation EU (NGEU), by forming a temporary extra-budgetary fund to finance specific tasks. The second option is raising debt for the financing of general budgetary expenditure by creating an on-budget, permanent borrowing capacity at the Union level. With respect to setting up another extra-budgetary fund, it is argued that there is no general barrier under EU primary law. However, given the exceptional and temporary nature underpinning NGEU, any extra-budgetary financing reduces the legal and quantitative space for repeating such constructions. While it is also concluded that debt-financing the general EU budget would be legally feasible, the scope of EU borrowing would remain severely limited compared to a fully-fledged sovereign State. Member States would have to ex-ante specify the permissible amount of borrowing and ensure that the EU has sufficient means to meet its debt service in any given year, which must be secured by a sufficient amount of (genuine) own resources.When it comes to spending the borrowed funds, the EU enjoys considerable flexibility. While NGEU drew on the Treaty’s “solidarity clause” to channel the revenue, alternative legal bases could be invoked, serving the purpose of, inter alia, climate funding, cohesion policy, infrastructure, or research.
Grund, S., & Steinbach, A. (2024). Debt-financing the EU. Common Market Law Review, 61(4), 993–1018. https://doi.org/10.54648/cola2024066
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