Could Europe sell US debt if a Greenland deal doesn’t come through?

The hypothetical scenario of Europe weaponizing its holdings of US Treasury debt in retaliation for a failed geopolitical agreement, such as one involving Greenland, presents a conflict between economic pragmatism and strategic leverage. Europe, collectively, represents one of the largest foreign holders of US debt, totaling trillions of dollars, primarily held by central banks and major financial institutions in countries like Germany, France, and the Netherlands.

Technically, Europe could initiate a massive sell-off. However, analysts overwhelmingly agree that such a move is highly improbable due to the catastrophic economic consequences it would unleash, primarily upon Europe itself. A concerted effort to liquidate billions in US Treasuries would instantly cause US bond yields to spike, driving up borrowing costs for the US government and potentially triggering global financial volatility. Furthermore, Europe’s central banks rely on US Treasuries as the world’s most liquid and safest reserve asset. Selling them would necessitate holding less secure alternatives or facing a liquidity crunch.

From a strategic perspective, the relationship between Washington and major European capitals is far too interconnected, particularly regarding security and trade, to risk deliberately destabilizing global markets over a specific regional dispute, even one as strategically important as Greenland. The motivation for such an action would be purely political signaling, but the economic self-harm would far outweigh the temporary geopolitical leverage gained. While disagreements over strategic territory or trade policy are common, economic retaliation is usually limited to targeted sanctions or regulatory maneuvers, not actions that threaten the stability of the entire transatlantic financial architecture.

Source: Could Europe sell US debt if a Greenland deal doesn’t come through?