Holding of US Treasury debt by the euro zone and the European Union: Causes, economic consequences and effects on relations between the United States and Europe

The holding of US Treasuries by the euro zone or by the European Union has increased markedly and has become very significant (Europe lends more, in terms of outstanding amount, to the United States than China). This is a fairly logical consequence of: The euro zone’s transition to an external surplus; The search for risk-free bonds with a higher yield than those issued in Europe. This is a frustrating situation for the euro zone (and the EU), as these savings would be better used to finance additional investments in Europe. Moreover, one could expect the massive holding of Treasuries by Europe to lead to a cooperative situation between Europe and the United States, as was the case in the past between United States and China: the United States accepts its trade deficit with Europe since Europe in return finances the United States. Donald Trump's periodic protectionist threats to Europe seem to show that despite Europe’s large holdings of Treasuries, this cooperative situation does not appear. All in all, Europe’s financing of the US Treasury is not positive: It is a less profitable investment than investments in the real economy in Europe; It has not led to a situation of economic and financial cooperation between Europe and the United States .