FRANKFURT (Reuters) – France’s central bank governor called on Wednesday for the creation of euro zone bonds, a common Treasury and even a shared budget in an ambitious speech before a European Union parliamentary committee.
Francois Villeroy de Galhau’s comments echo long-standing French proposals, which have so far fallen on deaf ears in countries such as Germany, which fear they would end up footing the bill for their struggling neighbors.
In a bid to create a safe asset for banks to use as collateral, the French governor advocated the creation of synthetic euro area bonds, backed by actual debt issued by member countries.
“In this case, each member state would retain sole responsibility for the issuance and repayment of its debt,” Villeroy said.
He also envisaged the creation of a euro zone finance ministry in charge of coordinating economic policy and, eventually, a euro area budget.
“A genuine euro budget would be a stabilisation tool and could include, for example, a European-wide unemployment insurance scheme,” Villeroy said.
“It could also be used to finance certain ‘European public goods’ such as digital technology, the energy transition or the integration of refugees. And in the long term, it would be directly able to raise taxes and issue common debt.”
(Reporting By Francesco Canepa; Editing by Balazs Koranyi)