Year: 2026
Type: article
Abstract: The euro area has debated a common safe asset for more than 15 years, almost always as a question of fiscal mutualisation – who pays when things go wrong. This article reframes the question. A safe asset is, first and foremost, financial-market infrastructure: it anchors yield curves, underpins collateral in repo and derivatives markets, and transmits monetary policy. The euro area built a monetary union without this infrastructure, and the costs are now visible. European repo markets are increasingly collateralised in US Treasuries. European banks cannot scale in the absence of a deep, integrated capital market. European savings flow overseas rather than financing European assets. An April 2025 episode, in which US Treasuries briefly lost their safe-haven properties, only sharpened the urgency. The choice facing Europe is not between fiscal sovereignty and fiscal mutualisation, but between building this infrastructure and continuing to import one from abroad.
Source: The Economists Voice
DOI: 10.1515/ev-2026-0018
Authors: Tatiana Farina, Florian Heider
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $2,712
OpenAlex ID: W7160825244