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When EU Budget Commissioner Johannes Hahn stepped in front of the cameras and microphones in the press room of the EU Commission on Wednesday two weeks ago, he also had a message for large banks and other institutional investors: “The EU Commission is ready to do business with you make. “In the coming months and years, the authority will take on up to 800 billion euros in new debts on the markets in order to finance the EU reconstruction plan during the Corona crisis.

"This is a game changer," said Hahn, looking at total debt issues - that changes everything.

For the first time the EU Commission will incur such large amounts of debt.

It is an unfamiliar role for the authority and for Hahn.

After all, the EU Commission has so far mainly distributed money that it has received mainly from the 27 member states.

So far, only a small part of the EU budget flows from other sources.

Now Hahn has to woo the investors' money himself.

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However, that should be easy.

Banks, mutual funds and other investors are waiting for the coming billion euro debt.

For a long time, professional investors have been asking for a so-called European Safe Asset - a safe asset class from Europe with an excellent credit rating.

Investors such as insurance companies depend on such practically fail-safe investments such as federal bonds in order to secure their portfolios and the payment promises to their customers.

"Investors will scramble for the commission bonds," predicts Guntram Wolff, director of the Brussels think tank Bruegel.

“In the EU and around the world, there is a lack of safe paper for institutional investors to invest in.

That is why banks have long been demanding bonds at EU level. "

Limited supply of government bonds with the best creditworthiness

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In fact, the supply of government bonds with first-class credit ratings in the euro zone has declined massively over the past 15 years.

Since the euro crisis, the rating agencies have downgraded Italy, Spain, Greece and other issuers.

This means that there is a considerable imbalance worldwide: the Americans provide a large number of these very safe investments, while Europe provides relatively few, because there have been so many downgrades in the euro zone.

In addition to some euro countries such as Germany, Norway, Great Britain, Japan and Australia, for example, also issue bonds with high credit ratings.

It has already become apparent in recent months that the commission will have an easy time placing its bonds.

The Commission has already issued bonds for the European short-time working aid Sure, which was launched during the Corona crisis, in order to finance the program, which totaled 100 billion euros.

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She transfers the money to member countries so that the national governments can use it to finance short-time working programs.

The bonds for Sure were virtually torn from the hands of the EU Commission by institutional investors.

It was a test run - and a very successful one on top of that.

Part of the reason for the success was that the bonds served a social purpose.

Professional investors, especially those who invest for the public sector, are increasingly under pressure to invest a large part of their money sustainably.

At the moment, however, the demand for such sustainable systems that meet social criteria and serve environmental protection is far greater than the supply.

Bonds for climate protection expenditure or social measures are therefore selling extremely well.

Hahn and the employees in his new fundraising unit are just right.

"30 percent of our reconstruction plan should be financed through green bonds," said Charles Michel, President of the European Council, at the climate summit convened by US President Joe Biden last week.

Hundreds of billions of billions of green debts that the markets should gratefully accept.

EU wants to create standards for green bonds

The issues should also consolidate Europe's position in sustainable investments.

At the moment, more green bonds are issued in euros than in any other currency.

The EU already has the most advanced rules for sustainable investments in the world and aims to create a standard for green bonds in the coming months.

It could become the blueprint for rules in the rest of the world and bring a good part of the green plant business to Europe - at least that is the hope in Brussels.

The prospects for EU bonds are so good and the success of the Sure placement was so great that some national finance ministries are already concerned about the up to 800 billion euros that the EU Commission will place on the markets in the coming years want.

After all, in terms of creditworthiness, EU bonds play in the same league as federal bonds.

"Some countries are apparently worried that the new bonds at EU level could ensure that their own papers are less in demand," says Bruegel director Wolff.

"In fact, it would be unfavorable if the Commission placed many papers at once and if Germany, France and Italy were to be placed on the market with large placements on the same day."

The Commission takes these fears seriously.

“We rely on full transparency,” said Budget Commissioner Hahn, when asked about these concerns.

“We will publish our financing plans every six months for investors and those affected.

And we will coordinate with other issuers so that emissions do not overlap. "

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In the years to come, the new EU debt is likely to play a major role in the financial markets;

In all likelihood, however, not in the long term.

It is unlikely that they will act as a counterweight to dollar bonds - at least as long as the reconstruction fund is a one-off project, as promised by Chancellor Angela Merkel (CDU).

“The Commission's bonds will only play a role in the next three years, because during this time the Commission is placing very high volumes compared with the borrowing of the member states,” says economist Wolff.

He expects that the Commission will ultimately borrow around 500 billion because the loans that the reconstruction fund, which is worth around 750 billion euros, will not be able to be used by all member states.

Measured against the total amount of public debt in Europe, the influence of the Commission papers is therefore very limited.

A look at the outstanding debts of the largest euro countries shows that: Italy alone has bonds to the value of 2,000 billion euros, and France and Germany have similar amounts.

However, if the debts at EU level become permanent, as has already been demanded in some capitals, then the EU Commission is likely to become a major player on the European financial market.

“Everything on stocks” is the daily stock market shot from the WELT business editorial team. Every morning from 7 a.m. with the financial journalists Moritz Seyffarth and Holger Zschäpitz. For stock market experts and beginners.

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