A well-designed European sovereign debt architecture should avoid debt mutualization, create a large safe asset, and reduce the risk of self-fulfilling crises. This note derives a European debt trilemma, showing that no feasible architecture can simultaneously achieve all three objectives. The note then develops a simple model to evaluate the Blanchard and Ubide (2025) proposal. The model establishes a safety condition justifying the 25 percent replacement threshold, average cost neutrality as a consequence of Modigliani–Miller, and, most importantly, strengthened fiscal discipline at the margin, since the rate on national bonds is strictly more sensitive to domestic fiscal conditions than the rate it replaces.
