MNI SOURCES: Europe Commission Eyes Debt Office For Covid Plan

As the EU Commission prepares to borrow nearly EUR1 trillion over the next few years to fund its Covid recovery fund and other programmes, some of its officials are pondering whether it needs its own debt management office, sources told MNI.

The Commission has already started consulting with national debt agencies on the mechanics and organisation of its borrowing program, as it prepares to seek up to EUR100 billion for its SURE employment guarantee programme, EUR750 billion for the Recovery and Resilience Fund and another EUR60 billion or so for older programmes. It plans to start bond issuances for SURE before the end of this year.

"Yes, they are very keen to have their own debt agency," said one Brussels-based official familiar with discussions on the issue.

But other sources also see a strong case for allowing the European Stability Mechanism, Europe's bailout fund, to raise the money the Commission needs, given its established capital markets expertise.

"They could have easily tasked the ESM, although it's not an EU institution – well it's a European project - and it would have been cheaper. The Commission will have to build new capacity and expertise," another source said.

"And it (ESM) would be well placed and has experience in marketing European bonds at a global level. After all this is what (ESM Managing Director) Klaus Regling has been really good at," the same source said.

"INSTITUTIONAL COMPETITION"

Other sources point out that there has always been "institutional competition" between the Commission and the ESM – always viewed in Brussels as something of an outsider – and deliberately sited in Luxembourg to pre-empt potential cultural contamination from the EU's established institutions.

"This is an EU versus euro area issue," said another source familiar with the issue."

But another source dismissed ideas that the Commission would or should resort to support from the ESM on issuance or distribution.

"They (Commission) want their own (DMO)," the source said, suggesting that becoming a permanent presence in the bond market probably holds attractions for the EU agency.

The ESM has been in search of a role in recent years, following its rescues of Portugal, Ireland, Greece, Cyprus and the Spanish banking system. Eurozone countries have so far been loath to take up the offer of the ESM's Pandemic Credit Lines, despite generous limits and lack of conditionality, while Italian objections to the ESM reform treaty have also stalled its ambitions to play a key role in European banking union.

"The ESM doesn't have much going on at the moment," the same source said.