Eurobonds: the Rubicon for European Unification

Eurobonds are on the European Union’s agenda - the issuance of EU-wide debt securities and with it the collectivisation of national debts at the European level. For decades, this has been dreamed of as the next step in the ongoing process of European integration. No wonder Europhiles are so enthusiastic: once the EU gains the power to issue its own bonds, it effectively becomes “a state.” It could then – at least in principle – spend money independently, finance projects, build an army, and so on, no longer needing to ask the member states for permission. They would be sidelined for good, left to watch from the margins. Power would lie with Brussels.

This transfer of sovereignty seems largely to escape the current debate on eurobonds. Instead, attention is focused on the economic risks and the budgetary rules which must accompany them. These are important and fair points — but they are not the fundamental issue. Take the interview given by the new president of De Nederlandsche Bank (DNB), Olaf Sleijpen, to De Telegraaf last weekend. As successor to the outspoken Europhile Klaas Knot, Sleijpen offers a more nuanced view of his predecessor’s enthusiasm for eurobonds. He believes that, “We should not just agree to the issuance of European loans.” It must be prevented, he argues, “because otherwise the mountain of debt in Europe will only grow even larger as a result.”

So, not “just” agree, unless we can secure certain “guarantees.” We’ve heard that before. For example, when the euro was introduced. That did not really work either, and back then too, the debate ignored the political dimension: that by giving up your own currency, you surrender a great deal of sovereignty.

The De Telegraaf editorial of 10 November called Sleijpen’s warning “very welcome.” We must not ignore, the paper argued, “the risks for the Netherlands of the handouts to France and Italy.” According to De Telegraaf, it is good that the DNB president “sets the strict condition that financially unsound countries must make extra cuts if more eurobonds are introduced.” But, the editorial continued, “that is a good step, but not strict enough. The budgetary rules have been flouted for years. The Netherlands must take a hard-line stance: eurobonds are off the table for as long as countries like France and Italy have not put their house in order.”

This commentary is emblematic of the financial-economic tunnel vision to which the eurobond debate has been reduced. “Putting their house in order” and “risks.” First of all, they are never going to put their house in order. You can’t turn Greeks into Germans. You can’t turn the French into the Dutch, no matter how many agreements you make, how many “watchdogs” and “control mechanisms” you build in. The economies of Southern Europe will remain weaker than those of Northern Europe for generations to come. As a result, they will always have to borrow at higher interest rates, and will therefore always cost the Northern countries money if we collectivise the debts.

But secondly, the problem is more fundamental: it concerns the transfer of sovereignty. Once the European Union can issue its own debt, federalisation will accelerate rapidly. The remaining sovereignty will evaporate, because the EU will no longer need the member states’ approval for the projects it pursues.

The EU would then become a superstate with its own army, its own government, and its own debts. Dutch politicians would look on and say that this was never the deal, that we never agreed to a European army, never agreed to paying higher interest rates; never agreed to a European superstate. And yet, it came to be! So no. Don’t do it. Eurobonds are both economically irresponsible and politically unacceptable.