Perché Eurobonds è una buona idea: l’UE è un formidabile potere economico. Eppure il sistema finanziario europeo si basa ancora sul dollaro e sulla banca centrale degli Stati Uniti. Questo deve cambiare

If you ask Europeans, it was unbearable to watch. A humiliation. The trade deal that Donald Trump and Ursula von der Leyen concluded this summer drew scathing comments. This was also the opinion of a majority of ordinary Europeans, according to a survey of more than 5,000 Germans, French, Italians, Poles and Spaniards.

This aversion is not surprising when you look at the deal itself. It is completely skewed. The EU is reducing various tariffs on American products, while Trump is significantly increasing tariffs on European products to 15 per cent. And then the EU also promises to buy hundreds of billions of euros worth of American energy and invest in the US. Hello. Add that to the ostentatious fawning at the NATO summit in The Hague, and you get a picture that is difficult to watch. Kneeling before Emperor Trump.

Now, most people understand that, given the circumstances, this deal was probably the best the EU could achieve. Economically, the EU could have responded much more forcefully, but militarily we cannot do without the US. Moreover, several countries are facing worse outcomes. Perhaps the European deal was the best of a bad bunch. And the EU has not lost all its nerve: Brussels is still imposing fines on American tech giants.

The big question now is: how can we prevent ourselves from being brought to our knees again in one, two or four years’ time? I sincerely hope that everyone in European public administration is working hard to make Europe less dependent and less easily intimidated. That is a huge task. We must be able to defend ourselves without the Americans. We must stimulate the European defence industry. We must stop storing the bulk of our important government data in the US.

Now that the US is using our dependence as a weapon against us, Europe must see greater independence from the US as a shield.

In this brutal power game, one dependency is, in my opinion, not discussed enough: that of the American financial system. The EU is a huge trading bloc and an economic powerhouse. Yet the European financial system still relies on the dollar and the American central bank. The dollar is the world’s reserve currency, the linchpin of the international financial system. Much international trade is settled in dollars. US Treasury bonds are the safe haven where countries, central banks and companies store their money and flee to during crises and times of stress.

And when no one wants to lend money to anyone else, when panic freezes the financial system, the US central bank opens the money tap. During the three recent crises, Europe was also on the Fed’s life support. In the financial crisis of 2008, the euro crisis of 2010 and the coronavirus crisis of 2020, the Fed lent hundreds of billions of dollars to alleviate the stress and freeze in the European banking system. There is now concern about whether these “swap lines” will still be open under Trump.

Anyone who wants to hold their own geopolitically must therefore rely less on the dollar. This can be achieved by making the euro an alternative reserve currency, a currency in which you can safely store your assets. According to economists’ calculations, such reserve currency status has more advantages: it allows the US to borrow more cheaply, as do American companies. There is a huge opportunity for the euro now that many countries are looking for an alternative to the power politics of the US.

European leaders say they want to make the euro more powerful, but that will not happen by itself. The EU, like the US, must actively pursue this goal. The EU should promote the use of the euro as a means of payment in international trade. And, like the US, we need a large, well-stocked capital market with creditworthy government debt securities that are easy to trade. Not the fragmented capital market we have today. That means common rules and greater integration.

But we also need debt securities in which people can invest with confidence. This can be achieved by issuing joint debt as a eurozone: eurobonds. This sends a powerful political and economic signal: we are in this together.

Wait a minute, more debt? Joint debt issuance? Some eurozone countries already have high levels of debt, and the French government is already struggling with budgetary problems! Economists have lots of ideas for this: you could convert a small portion of the existing debts of eurozone countries into eurobonds. That way, you avoid additional debt. You could give eurobonds a different status than regular debt from eurozone countries. You could make smarter agreements about reducing debt.

Trump is working to increase the power of the dollar by giving stablecoins, cryptocurrencies linked to the dollar, free rein and promoting them. If these dollar stablecoins become popular, the European Central Bank fears that the dollar could play an even greater role within Europe. That would undermine European monetary policy.

We can sit back and watch, satisfied that we are blocking euro bonds, because that way we can keep the French in check, but then I think you are missing the bigger picture. A power game is being played here for world domination, and our former ally now sees Europe as a vassal. In that world, do you want to share more risks with euro countries or remain Trump’s plaything?

We are Trumps plaything because we are unwilling to make sacrifices. It would have been good for European decoupling if the deal had been worse, horrible even. There is absolutely no pressure for EU officials to decrease dependency now. In fact our interior minister in Germany already said he has absolutely no issues to use Palantir on government level. Another day, another show of weakness.

A great article by Dutch economist Marike Stellinga. The Netherlands was one of the so-called “frugal four” but times are changing. The same for Denmark, Austria and Sweden.

Eurobonds would be a huge step. The point of no return toward a federal Europe. Because in the long term a shared debt instrument would require a fiscal union and further centralization of economic decision-making.

“We must act more and more as if we were one state” – Mario Draghi