The Constitutional Challenge of Common EU Debt Sustainability After NextGenerationEU

The EU's response to COVID-19 through NextGenerationEU represented a watershed moment in European integration, establishing common debt issuance as a policy tool for systemic crises management. Yet, this temporary measure exposed fundamental tensions between the fiscal demands of an integrated EMU and the institutional framework designed for sovereign states. This paper examines whether the current MFF proposal is sufficient to ensure NGEU debt sustainability and future common financing requiring fundamental institutional change. This paper addresses the workshop theme of the evolving interpretation of key EMU constitutional rules by analysing how a rethinking of mutualized issuance of debt might impact the relationship between the EU and its Member States. NGEU was financed through temporary borrowing backed by an increase in the EU's own resources ceiling, with repayment obligations until 2058. However, unlike traditional sovereign borrowers, the EU cannot simply refinance debt. It must repay from an expanding revenue base. This leads to the question: how can the EU sustain both ordinary budgetary functions and debt repayment simultaneously? The proposed new own resources in the next MFF seek to expand autonomous EU revenue streams beyond GNI contributions, representing genuine sovereignty transfer and institutional deepening. This paper's core novelty lies in examining whether these proposals are sufficient. As established by the NGEU Regulation, if new own resources fail to meet both ordinary EU budgetary needs and NGEU repayment obligations, the gap will be filled by increased yearly Member State contributions. Critically, treating increased national contributions as "debt mutualization without competence transfer" represents the paper's primary analytical innovation. This distinction challenges prevailing literature, which typically frames the own resources debate as binary: either new autonomous revenues or increased GNI contributions. This paper argues that this framing obscures a crucial third mechanism: implicit mutualization through increased national budgetary contributions. This outcome generates predictable friction between Member States, forcing them to increase contributions covering financing disbursed elsewhere while facing decreased resources for national spending. Examining current proposals, the paper demonstrates this scenario appears most likely. The paper's distinctive contribution is proposing an alternative framework: Member States should designate future common debt issuance as "own resources." This shift is not merely technical, but constitutional, indicating whether mutualized debt obligations become permanent EU liabilities serviced by autonomous revenues, or remain collectively guaranteed national liabilities. This choice determines whether the EU acquires fiscal capacity or continues to operate on a crisis-led basis. Drawing on treaty law, EU budgetary practice, and political economy analysis, this paper analyses the tension created by current MFF reform proposals, which risk being inadequate precisely because they avoid this fundamental choice. Sustainable debt mutualization requires institutional change: either expanding EU own resources genuinely or limiting mutualization to sectors with common interest. The current hybrid mechanisms generate uncertainty for both fiscal sustainability and institutional legitimacy. The paper concludes that forthcoming MFF negotiations will determine whether EU sovereign debt mutualization becomes durable European governance or remains episodic emergency response. This choice represents the EU's institutional response to its most significant crisis since the eurozone sovereign debt emergency.