DEBT-FINANCING THE EU

The EU has transformed from an international organization to anautonomous legal regime with supremacy and direct effect. However, ineconomic terms, the Union never fully emancipated - it remainsdependent on Member States in securing funding to fulfil its objectives.Against that backdrop, this article explores the legal leeway for twoavenues of financing the EU through the issuance of public debt. The firstis a replication of Next Generation EU (NGEU), by forming a temporaryextra-budgetary fund to finance specific tasks. The second option israising debt for the financing of general budgetary expenditure bycreating an on-budget, permanent borrowing capacity at the Union level.With respect to setting up another extra-budgetary fund, it is argued thatthere is no general barrier under EU primary law. However, given theexceptional and temporary nature underpinning NGEU, anyextra-budgetary financing reduces the legal and quantitative space forrepeating such constructions. While it is also concluded thatdebt-financing the general EU budget would be legally feasible, the scopeof EU borrowing would remain severely limited compared to afully-fledged sovereign State. Member States would have to ex-antespecify the permissible amount of borrowing and ensure that the EU hassufficient means to meet its debt service in any given year, which must besecured by a sufficient amount of (genuine) own resources.When it comesto spending the borrowed funds, the EU enjoys considerable flexibility.While NGEU drew on the Treaty's "solidarity clause" to channel therevenue, alternative legal bases could be invoked, serving the purpose of,inter alia, climate funding, cohesion policy, infrastructure, or research.