The Commission may distribute up to €395 billion in low-interest loans to countries facing unforeseen crises. However, to activate this mechanism, approval from national capitals and the European Parliament is necessary, as a concession to those skeptical of joint debt.
Grants, essentially free money, are justified solely to support Ukraine, a goal widely accepted in EU capitals. A €100 billion fund for Ukraine will consist of loans and grants, yet to be finalized.
Market Reaction
Currently, markets regard EU joint debt similarly to the debt of supranational bodies like the World Bank or the European Investment Bank.
The Commission aims for it to be treated as government bonds, allowing EU bonds to be part of sovereign debt indexes attracting billions in investment, thus reducing borrowing costs.
Alvise Lennkh-Yunus, managing director at Scope Ratings, with an AAA rating for EU debt, mentioned that “EU debt is already very much appreciated by investors.” He highlighted the robustness of the EU’s governance framework, budget backing, member state support, and financial architecture.
He noted that large investors like pension funds and foreign central banks are buying EU bonds to diversify from dollar-focused assets such as U.S. Treasury bonds, which look increasingly unstable, especially with uncertainty from the Trump administration.
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