BRUSSELS, June 1 (Reuters) - Euro zone joint debt issuance in the long run is absolutely necessary, the European Commissioner for Economic and Financial Affairs Pierre Moscovici said on Thursday.
Speaking at the Brussels Economic Forum, Moscovici said such a euro zone bond would help cut the toxic link between banks and their domestic sovereigns.
“In the short-to-medium term, sovereign bond-backed securities could serve that purpose. But in the longer run, the development of a genuine euro area safe asset is absolutely necessary,” Moscovici said.
The idea of such a European safe asset was published by the European Commission in a reflection paper on the future of the euro zone on Wednesday and was immediately rejected by Germany, which does not want to hear of any debt mutualisation.
“We are aware of objections, and agree that the mutualisation of legacy debts has to be avoided,” Moscovici said.
“There seems to be, however, scope for other constructions that can deliver what we need. The creation of a euro area safe asset that fulfils some key requirements is a precondition for changing the currently risk-free status of sovereign bonds, which some see as the ultimate measure for reducing banking sector risk,” he said. (Reporting By Jan Strupczewski; editing by Robert-Jan Bartunek)