The US’s interest in Greenland has strained its relationship with the EU. European leaders are considering drastic measures, including cutting off US access to EU markets and offloading trillions of dollars in US assets held in Europe. Dumping US debt could have global economic repercussions and affect the US financial system.

European powers were weighing options to respond to US aggression. Denmark sent special forces to Greenland, while others suggested using US debt as leverage. Deutsche Bank’s FX strategist noted the US relies on others to pay its bills, owning $8 trillion in US bonds and equities, twice as much as the rest of the world combined.

Europe may struggle to offload US debt due to sticky foreign government buyers and private entities holding much of the debt. The lack of alternatives to US debt as a risk-off investment and limited potential buyers, like China, could complicate efforts to reduce exposure to US assets. Asian buyers lack the capacity to absorb large amounts of US debt.

Stablecoin issuers have emerged as major buyers of US debt, creating a link between their growth and the liquidity of US Treasury markets. However, this trend poses risks, especially if there are fewer buyers for US debt. A run on stablecoin issuers could lead to liquidity shocks in US debt markets and impact the credibility of US Treasury markets.

Economic and military tensions have strained relations between the US and the EU, prompting discussions of potential responses to US aggression. Dumping US debt could have significant global economic implications, but challenges remain in compelling private entities to sell US assets. Stablecoin issuers have become major buyers of US debt, deepening their connection to the liquidity of US Treasury markets. Latvian President Edgars Rinkēvičs expressed hope for dialogue between the EU and US, but warned of a “clear and present danger” to Europe, Greenland’s sovereignty, and US debt markets. The relationship between the two entities remains uncertain, with potential repercussions on various fronts.

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Read more at cointelegraph.com: Could EU Sell US Debt if Greenland Deal Falls Through?