Germany’s central bank chief voiced doubts over the need for joint European Union debt issuance.
“I do not see much merit in giving incentives on the fiscal side to increase subsidies and state aid,” Joachim Nagel said in Frankfurt on Tuesday. “And you won’t be surprised that the Bundesbank is skeptical about extending the scope of joint borrowing beyond the NextGenerationEU program.”
The EU is looking to jump-start its defense industry after years of underspending following the Cold War. Some officials have suggested joint borrowing could be used for this, though the German government is among those opposing such a move.
“We do not consider common debt necessary for defence purposes, either,” the Bundesbank chief said. “Higher defence spending is entirely possible within the usual budgetary processes. There’s no denying, however, that the EU is currently facing major geopolitical challenges and needs to become more robust.”
The Covid crisis led the EU to launch an unprecedented financial support program — NextGenEU — that involved the pooling of debt.
“NextGenEU was an understandable response to the pandemic emergency,” Nagel said. “But given the current level of integration, it should remain a one-off exception to the rule that the EU must not borrow money.”
