*Russia, a tradition of pushing Europe toward unity since 1914.*
Bond. Joint Bond.
So it begins.
This is historic.
The birth of a new super power.
can’t wait to buy bonds!!
Paywall.
Corona bonds.. now energy bonds?
The European Union will unveil a plan as soon as this week to jointly issue bonds on a potentially massive scale to finance energy and defense spending as the bloc copes with the fallout from Russia’s invasion of Ukraine.
The proposal may be presented after the EU’s leaders hold an emergency summit in Versailles, France, that starts Thursday, according to officials familiar with the preparations. Officials are still working out the details on how the debt sales would work and how much money they intend to raise.
The spread between 10-year Italian and German yields — a key gauge of risk in the region — tightened 10 basis points to 151 basis points following the news, as the yields on EU bonds rose on the prospect of increased supply. The euro extended gains, rising 0.6% to $1.0920.
The extraordinary move comes just a year after the EU launched a 1.8 trillion-euro ($2 trillion) emergency package backed by joint debt to finance member states’ efforts to deal with the pandemic. Now, the bloc faces massive financing needs as it begins to reform its military and energy infrastructure following the Russian attack.
“We have to find new tools to address new issues this crisis raises in front of us,” the EU’s commissioner for the economy, Paolo Gentiloni, said Monday evening to lawmakers in Strasbourg, France. He added that he thought EU leaders would give political guidance on further moves at the summit.
A commission spokesperson declined to comment on the specifics but said officials continue to monitor the situation and are ready to react to the changing circumstances.
The plan would involve the European Commission, the bloc’s executive arm, issuing bonds and then channeling the proceeds to member states in the form of concessionary loans to finance spending in the areas, according to the officials who asked not to be identified because the plans are private.
One option is to structure it like the bloc’s SURE program, some of the officials said, referring to a scheme that was used to finance employment support initiatives in the aftermath of the pandemic, under which member states repaid soft loans provided by the commission.
The invasion has forced the bloc to rethink its most basic energy needs, as more than 40% of EU gas imports and one quarter of its oil come from Russia. On Monday, Moscow threatened to cut gas supplies to Europe via the Nord Stream 1 pipeline. But as the EU transitions away from Russian gas, it will have to turn to other, more expensive, sources.
While the bloc can still boost imports of liquefied natural gas from countries such as the U.S., such purchases will be more expensive. And refilling storage to an average level will be challenging due to soaring prices: The price tag could reach 70 billion euros compared with 10 billion in previous years, according to a report by Belgian-based think tank Bruegel.
The EU has also had to rethink its defense strategy, as it has typically relied on the protection of the U.S. through its commitments in the NATO alliance.
“Tens of billions of euros will be needed to strengthen European defense, to not rely on the U.S. and to be self-sufficient in energies, to be independent of Russia,” Slovakia’s finance minister, Igor Matovic, said on Tuesday. “Joint EU bonds are the way to go — Slovakia will surely need a helping hand from richer European countries, we can’t do it ourselves.”
Germany has made a historical about face and pledged to ramp up military outlays, with Europe’s largest economy set to spend 100 billion euros to modernize its army.
What took them so long
It’s wild how this is now presented as a standard process when 4 years ago the Council wrangled for months about the corona bonds
A lot has changed in very little time. Thanks Russia
The one thing I would wonder about is whether the ECB will wind up printing up new Euros in order to purchase these bonds, through their “quantitative easing” programs. They already have a considerable amount of sovereign debt on their books.
If the EU can put on the market 1 trillion for defense, that will give Putin food for thought.
Given the situation, this seems like a necessary move.
The dependency on Russian energy must be ended – and remarkably fast. Whether the short-term solution will be renewable or fossil, nuclear, wind, solar, tidal, geothermal, storage, more pipelines to Africa or more LNG ports – it’s going to need investments.
Modernization of defense will also need investments.
12 comments
*Russia, a tradition of pushing Europe toward unity since 1914.*
Bond. Joint Bond.
So it begins.
This is historic.
The birth of a new super power.
can’t wait to buy bonds!!
Paywall.
Corona bonds.. now energy bonds?
The European Union will unveil a plan as soon as this week to jointly issue bonds on a potentially massive scale to finance energy and defense spending as the bloc copes with the fallout from Russia’s invasion of Ukraine.
The proposal may be presented after the EU’s leaders hold an emergency summit in Versailles, France, that starts Thursday, according to officials familiar with the preparations. Officials are still working out the details on how the debt sales would work and how much money they intend to raise.
The spread between 10-year Italian and German yields — a key gauge of risk in the region — tightened 10 basis points to 151 basis points following the news, as the yields on EU bonds rose on the prospect of increased supply. The euro extended gains, rising 0.6% to $1.0920.
The extraordinary move comes just a year after the EU launched a 1.8 trillion-euro ($2 trillion) emergency package backed by joint debt to finance member states’ efforts to deal with the pandemic. Now, the bloc faces massive financing needs as it begins to reform its military and energy infrastructure following the Russian attack.
“We have to find new tools to address new issues this crisis raises in front of us,” the EU’s commissioner for the economy, Paolo Gentiloni, said Monday evening to lawmakers in Strasbourg, France. He added that he thought EU leaders would give political guidance on further moves at the summit.
A commission spokesperson declined to comment on the specifics but said officials continue to monitor the situation and are ready to react to the changing circumstances.
The plan would involve the European Commission, the bloc’s executive arm, issuing bonds and then channeling the proceeds to member states in the form of concessionary loans to finance spending in the areas, according to the officials who asked not to be identified because the plans are private.
One option is to structure it like the bloc’s SURE program, some of the officials said, referring to a scheme that was used to finance employment support initiatives in the aftermath of the pandemic, under which member states repaid soft loans provided by the commission.
The invasion has forced the bloc to rethink its most basic energy needs, as more than 40% of EU gas imports and one quarter of its oil come from Russia. On Monday, Moscow threatened to cut gas supplies to Europe via the Nord Stream 1 pipeline. But as the EU transitions away from Russian gas, it will have to turn to other, more expensive, sources.
While the bloc can still boost imports of liquefied natural gas from countries such as the U.S., such purchases will be more expensive. And refilling storage to an average level will be challenging due to soaring prices: The price tag could reach 70 billion euros compared with 10 billion in previous years, according to a report by Belgian-based think tank Bruegel.
The EU has also had to rethink its defense strategy, as it has typically relied on the protection of the U.S. through its commitments in the NATO alliance.
“Tens of billions of euros will be needed to strengthen European defense, to not rely on the U.S. and to be self-sufficient in energies, to be independent of Russia,” Slovakia’s finance minister, Igor Matovic, said on Tuesday. “Joint EU bonds are the way to go — Slovakia will surely need a helping hand from richer European countries, we can’t do it ourselves.”
Germany has made a historical about face and pledged to ramp up military outlays, with Europe’s largest economy set to spend 100 billion euros to modernize its army.
What took them so long
It’s wild how this is now presented as a standard process when 4 years ago the Council wrangled for months about the corona bonds
A lot has changed in very little time. Thanks Russia
The one thing I would wonder about is whether the ECB will wind up printing up new Euros in order to purchase these bonds, through their “quantitative easing” programs. They already have a considerable amount of sovereign debt on their books.
If the EU can put on the market 1 trillion for defense, that will give Putin food for thought.
Given the situation, this seems like a necessary move.
The dependency on Russian energy must be ended – and remarkably fast. Whether the short-term solution will be renewable or fossil, nuclear, wind, solar, tidal, geothermal, storage, more pipelines to Africa or more LNG ports – it’s going to need investments.
Modernization of defense will also need investments.