René Karsenti, president at the ICMA, said the issuance of eurobonds would "create a deeper market, enhance the position of the euro as international reserve currency and provide access to cheaper finance, as these assets will be viewed as close as possible to risk-free assets".
Speaking at the meeting of the European Bond Commission (EBC) in Frankfurt, Karsenti said the bonds should not be used as "crisis instruments", but rather as part of a permanent framework, which would serve as a "clear commitment" to fiscal convergence.
Chris Golden, chairman at the EBC, said a recent proposal put forward by ELEC – a network of European entrepreneurs established in 1946 – was "very attractive". The ELEC proposal is to pool short-term debt from all European Member States (except those receiving assistance) into a fund. After four years, the fund would either be closed or replaced by a new vehicle. The EBC chairman suggested that introducing the ELEC proposal through the "short end" of the market would be "an excellent way to test the waters at a relatively low cost". Karsenti, who contributed to ELEC's proposal, said the fund could also be used to refinance Member States' longer-term debt. "The moral-hazard aspect would also be taken into account, and, to avoid it, we suggested surcharges for countries with excess debt, which would be used as a first-loss buffer", he said.
Also speaking at the EBC meeting, Thomas Meißner, head of fixed income market research at Germany's DZ Bank, said it was not the European Central Bank (ECB) that would allay bond markets. "The ECB is not providing liquidity through its SMP [Securities Markets Programme]", he said. "Instead, it is buying up the last pieces you see in the market, which leads to even less liquidity afterwards."
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