Former economist Ulrike Malmendier urges the EU to prepare for the possibility of issuing Eurobonds, especially if Europe’s security situation deteriorates and a rapid increase in defence spending becomes necessary. “We could one day find ourselves in a position where Eurobonds are suddenly needed – for instance if the geopolitical climate worsens and we must quickly raise a large amount of money for defence” she told the “Rheinische Post” on Wednesday. “In that case we should be ready, and we should now take the time to design a sound framework for these instruments”.
Malmendier acknowledges the risks that critics point out, arguing that Eurobonds could threaten German and European financial stability – a concern she says is well‑founded. To address this, she proposes a tiered system. Blue Bonds, with collective liability, could cover up to 25 % of GDP and would carry a lower interest rate. Any amounts above that threshold would be issued as Red Bonds, which would be nationally liable and carry higher interest rates that differ from country to country.
She currently researches at the University of California, Berkeley, and until the end of February served on the expert council for the German economy.
