Proposals for a Common Euro Area Safe Asset

The Peterson Institute for International Economics held an event to discuss recent proposals to create a common “safe asset” for the euro area, on March 23, 2018. Philip R. Lane, governor of the Central Bank of Ireland, and Jeromin Zettelmeyer, PIIE, presented two recent major reports on why Europe’s lack of a common safe asset matters and how the problem might be solved without creating politically impossible mutual guarantees among member states.

The first proposal, presented by Governor Lane, is an extensive study conducted by a high-level taskforce of the European Systemic Risk Board, which Lane chaired. It considers the feasibility of creating sovereign bond–backed securities for the euro area—regulated but privately issued obligations backed by a diversified portfolio of euro area sovereign bonds.

The second paper, The Search for a Euro Area Safe Asset, newly issued by the Institute, was presented by its coauthor Jeromin Zettelmeyer. It critically examines four competing ideas for creating a euro area safe asset, including the proposal studied by Lane’s task force.

Lane has been governor of the Central Bank of Ireland and member of the governing council of the European Central Bank since November 2015. Prior to his appointment, he taught economics at Trinity College Dublin. He also previously chaired the Advisory Scientific Committee of the European Systemic Risk Board. Zettelmeyer has been a senior fellow at the Peterson Institute for International Economics since September 2016. Previously, he was director-general for economic policy at the German Ministry for Economic Affairs. He has also held staff positions at the International Monetary Fund and the European Bank for Reconstruction and Development.