ECB board member moots single EU debt agency

A senior European Central Bank director called Friday for a single debt agency to issue eurozone bonds and oversee budget policies, as leaders of the 17-nation bloc met in Brussels to bolster the euro. ECB executive board member Lorenzo Bini Smaghi used a speech in Lucca, Italy to float the idea of "a supranational entity in the euro area to issue government bonds for the member states." He speech was also published on the bank's website.
The idea is likely to meet opposition from Germany, which maintains that each eurozone country must be responsible for its own financing. Bini Smaghi argued that the plan he put forth would ensure fiscal discipline because "countries would in fact no longer have the capacity, technically or politically, to issue public debt on the market. "This could be a first step towards a single European bond," the ECB executive added, an idea vehemently opposed by Germany and other northern European countries. He spoke as eurozone leaders met to agree on at least the broad lines of the greater economic policy co-ordination needed to tame the bloc's dogged debt crisis.
Greece, bailed out last year by the EU and International Monetary Fund, called on its peers to take "strong European decisions to calm the markets," but expectations were for general accord only, not specific measures. Bini Smaghi acknowledged his idea was "almost a provocation," but said it would not necessarily force countries to integrate their budget policies or adhere to an integrated tax system.
"What is in common is just the tap, ie an integrated system of securities for issuing on the market the proceeds from which are then allocated to individual countries, according to joint decision-making mechanisms," he said. The European Council of Ministers could be charged with deciding how much debt should be issued and how to distribute the funds. The Council already oversees eurozone members' budgets, but its opinion is not binding at present, whereas it would be under the system he proposed, Bini Smaghi said.