Europe’s best bet for financial sovereignty is a true safe asset

The writer is Spain’s economy, trade and business minister

Ancient Rome was not built on legions alone. It was built on fides publica, the principle that the state’s credit was sacred and indivisible. That is what made vast armies and infrastructure possible. The principle came first; the instruments followed.

Europe today appears to be working backwards. We are debating defence, security budgets, industrial policy, digital sovereignty and energy grids without the one thing that would make them all affordable: a collective form of credit that the world trusts. Instead, we have numerous sovereign bond markets and fragmented annual budget cycles. The time has come to create a genuine European safe asset by significantly expanding the EU-issued bond market by 2028 — making it large enough to anchor our financial sovereignty and open a new era of economic autonomy.

There has never been a better time to do so. Global portfolios are diversifying rapidly, looking for high-quality, liquid safe assets. With its robust institutions and unwavering respect for the rule of law, Europe is a premier destination for long-term capital. Yet European markets remain small and fragmented. EU-issued bonds total about €1tn compared to nearly €30tn in outstanding US Treasuries, meaning they are unable to absorb global demand even when combined with the total of triple A and double A-rated sovereign bonds in the euro area.

Since 2025, the euro has appreciated 15 per cent against the US dollar. We are getting a stronger currency without the strategic dividends it should deliver: cheaper financing, deeper liquidity and greater financial stability. Capital is flowing towards Europe, but without a safe asset at scale it has nowhere to anchor. We need to correct this problem, which would make the reform agendas set out by Enrico Letta and Mario Draghi financially feasible.

A highly liquid euro-denominated security will allow investors to compare risk across borders on equal terms. It would also generate the underlying liquidity needed for a futures and derivatives market — without which institutional investors cannot hedge, and without which capital markets cannot mature. This infrastructure would provide the financial backbone needed to accelerate Letta’s single market proposal and facilitate cross-border investment.

Draghi’s investment agenda — hundreds of billions annually in defensc and security, energy and digital infrastructure — is affordable, just not at current prices. Investment at this scale is only viable if the cost of capital is competitive. A deep, liquid EU debt market would lower the cost of capital not just for sovereigns but for every European defence contractor, energy developer or digital infrastructure builder.

A European safe asset would complete the long-overdue EU financial architecture: a savings and investment union, unlocking idle private savings; a digital euro that ends our dependence on foreign payment systems; and a credible euro-denominated stablecoin market. Moreover, it would increase the euro’s use as a reference currency for trade and commodity pricing, reinforcing the gains from recent trade deals.

But a safe asset does not materialise through small steps or vague commitments. It requires a deadline that forces political alignment and a size that commands market credibility. The next EU budget cycle begins in 2028. That is the deadline — and it must be treated with the same political force Jacques Delors brought to the birth of the euro in 1999.

As Olivier Blanchard and Ángel Ubide argue, Europe needs a large enough share of its economic output represented in jointly issued EU debt to create an asset that global investors recognise as a genuine safe haven. Their proposal would create scale by reorganising existing debt and replacing up to a quarter of member states’ GDP in national bonds with senior European securities backed by earmarked VAT revenues. No new debt. No mutualisation. Just a smarter structure at a lower cost.

Alternatively, the European Commission could centralise a share of member states’ annual financing needs — refinancing part of the maturing debt and covering approved deficits. The stock of EU debt would grow to reach critical mass without increasing the overall debt burden. Brussels has already successfully channelled financing to governments to protect jobs during the pandemic.

Once the market exists, it will unlock something Europe has never had: the ability to finance common public goods — defence, energy, digital infrastructure — at sovereign-equivalent rates on a European yield curve. The safe asset creates the market; the market creates the fiscal capacity. Europe has the institutions, the legal framework and the economic weight to build its own fides publica. What it has lacked is the political will. It is time we cross this Rubicon.