The authors study the role of government debt maturity in a monetary union in the absence of fiscal transfers across countries. Authors’ key finding is that fiscal hedging is only possible when spending represents an aggregate shock in the union. In the case of idiosyncratic disturbances in spending it is not possible to target a portfolio which provides fiscal insurance to the governments: the allocation is one of incomplete financial markets. These implications are in line with the empirical evidence. Using a sample of 5 Euro area countries and historical holding period returns on government debt, we find that fiscal insurance is not significant against country specific shocks however, it is significant against aggregate shocks.