joint debt

Joint debt should not be the solution to the EU’s financial challenges, Germany’s Federal Finance Minister Lars Klingbeil has said, reiterating Berlin’s firm opposition to any new common borrowing and calling instead for alternative approaches within the existing fiscal framework.

Speaking in an interview with Reuters on the sidelines of the G20 finance ministers’ meeting in Durban, South Africa, Klingbeil stated that the extraordinary conditions which previously justified such measures no longer apply.

“Overall, we need to resolve the finances of the EU differently than through a policy of joint debt,” Klingbeil said. “Fortunately, we are not in such a crisis right now.”

Klingbeil was referring to the common EU borrowing arrangements introduced in 2020 in response to the COVID-19 pandemic, which included the €750 billion NextGenerationEU recovery fund. At the time, European leaders justified the measure as a one-off response to an unprecedented economic shock. However, some member states, including France and Italy, have since argued for expanding joint financing tools to support defence, energy transition, and industrial competitiveness.

Berlin, under Klingbeil’s stewardship, has taken a firm position against such proposals, citing concerns over debt mutualisation and long-term fiscal liability. Germany maintains that the EU’s future budgetary challenges, including those linked to climate policy and external security, must be addressed within the existing framework of national contributions and own resources, rather than through further common borrowing.

The remarks come as the G20 finance summit unfolds in the context of rising geopolitical and trade tensions, notably the looming threat of US tariffs on European goods. US President Donald Trump has proposed imposing tariffs of up to 30% on a range of EU exports. If enacted, the measures would represent a significant escalation in transatlantic trade disputes and could have wide-ranging implications for the EU’s export-driven economy.

“This has been dragging on for a very long time,” Klingbeil said, referring to ongoing negotiations with the US. “We really want to have a solution by August 1.”

The EU is currently preparing for the possibility of retaliatory action should no agreement be reached by the deadline. One of the instruments under consideration is the so-called anti-coercion instrument, designed to deter economic pressure against member states by enabling swift and coordinated countermeasures. Brussels has warned that a failure to reach a resolution would trigger a united and proportionate response.

“That’s the message we are sending,” Klingbeil said. “But rest assured, if it doesn’t work out, then we are prepared, we will react united and decisively, and then there will be a European response.”

Klingbeil’s presence in Durban contrasts with the absence of several senior counterparts. U.S. Treasury Secretary Scott Bessent did not attend the summit, and several European finance ministers were also missing from the talks. Despite this, Klingbeil expressed optimism regarding the quality of discussions taking place and the potential for strengthened partnerships among those present.

“I would have wished that more finance ministers were here,” he said, “but I believe that those who are here will make good discussions. There will be good partnerships, and that will certainly be an incentive for others to come next time.”

The G20 finance summit, which includes representatives from the world’s major economies, is being closely watched for signals of coordination on global challenges such as supply chain resilience, inflationary pressures, and debt sustainability in emerging markets. For the EU, however, internal disagreements on fiscal integration and external uncertainty over transatlantic trade relations have emerged as focal points.

In Brussels, the debate over common EU borrowing is expected to intensify ahead of discussions on the bloc’s next multiannual financial framework. Member states remain divided between those advocating for greater fiscal solidarity and others, led by Germany, insisting on strict adherence to existing treaty limits.

While Klingbeil’s remarks reaffirm Germany’s traditional stance, they also reflect growing concern in Berlin over the bloc’s ability to respond cohesively to external shocks without undermining fiscal discipline. His comments in Durban are likely to resonate with other so-called “frugal” member states, who have also voiced opposition to the permanent use of common debt instruments.

Meanwhile, discussions with Washington continue in an effort to avert a full-scale tariff dispute. The European Commission has not disclosed the precise contours of a potential deal but has indicated that talks are ongoing at the technical and political levels.

With transatlantic trade representing a cornerstone of the EU economy—the United States accounted for 20% of all EU exports last year—the stakes are considerable. Whether a compromise can be reached before the 1 August deadline remains uncertain. However, Klingbeil’s warning suggests that preparations for a coordinated EU response are already well advanced.