Spain proposes new EU joint borrowing mechanism

Spanish Finance Minister Carlos Cuerpo told Euronews that the current geopolitical climate offers a "window of opportunity" to advance a new joint borrowing mechanism for the European Union. With the United States resuming hostilities against Iran, the search for safe assets has become a priority, and the EU is pushing to strengthen the euro's international role as a reserve currency.

On Wednesday, Spain circulated a detailed proposal for a mechanism called the "European Sovereign Facility." It would centralise joint debt, reducing costs from national fragmentation, while requiring participating countries to comply with EU fiscal rules.

If all 27 member states, the European Stability Mechanism and the European Financial Stability Facility take part, annual issuance would reach €850 billion, allowing the EU to build a €5 trillion stock of joint debt within five years. If not all countries are willing, Spain envisages a "coalition of the willing" as an initial step. However, the proposal stresses that for the initiative to be meaningful, at least the five largest euro area issuers must participate, enabling annual issuance of roughly €540–550 billion.

The guarantees would come from two sources: loans to participating states and the EU budget. EU members are currently debating the 2028–2034 long-term budget, which must be agreed by end of 2026, with intense discussions on financing.

Spain will need to convince countries strongly opposed to further joint borrowing, such as Nordic nations, Germany and the Netherlands. In contrast, France and Greece have publicly endorsed new common borrowing.