In our view, the pandemic appears to be a potential catalyst for an effective relaunch of the European Union (EU) – providing the political momentum to reform and address historical weaknesses. The expectation of approximately €1 trillion in EU bond issuance over coming years is a significant step towards fiscal union and could bring fears of Euro breakup to an end. However, we also can’t ignore the risks and challenges that the EU faces. The pandemic response has been perceived as disjointed and slow, while internal conflicts have been exacerbated by arguments around adherence to EU rules.
Time will tell whether this recovery package was a one-off reaction to an unprecedented crisis, or the start of a deeper programme of integration, but by issuing a sizeable amount of joint debt, the EU is sending out a strong signal to the world and financial markets that it is ‘here to stay’.
Hassiba Ait, portfolio manager, fixed income, Insight Investment.
Doc ID: 650609