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Opinion
Marcus Ashworth

Rising Yields Will Test EU’s 800 Billion-Euro Promise

The NextGen package will be much more expensive than when it was launched, testing the solidarity of the bloc’s political leaders.

The rising cost of solidarity.

The rising cost of solidarity.

Photographer: Olivier Matthys/Bloomberg

It's reassuring that the European Union still enjoys strong investor demand for the debt it’s selling to finance the 800 billion-euro ($840 billion) NextGeneration pandemic recovery fund. Less welcome is the near tenfold increase in its funding costs compared with what it was paying at the height of the pandemic. Soaring inflation will make underpinning the bloc’s economy a lot more expensive, distributing the pain of higher yields across the region.

The EU raised 5 billion euros this week, selling bonds repayable in 2048 with investors bidding for seven times the amount offered. A relatively juicy 2.625% interest rate, and a yield about 80 basis points more than German levels and in line with French debt, helped boost demand.