A European Treasury should be created to pool debt management, starting with Germany and France, according to a report that French President Nicolas Sarkozy said he would pass on to the EU authorities.
The idea is one of 16 suggestions on ways to improve economic policy coordination in Europe, in a report presented to Sarkozy by Constance Le Grip and Henri Plagnol, respectively members of France's parliament and the European Parliament.
Sarkozy's office said the president would hand the report on to Herman Van Rompuy, president of the European Council, the institution where collective decisions are taken by the leaders of the 27 EU countries and the 17 of them that share the euro.
Sarkozy has officially rallied behind German leader Angela Merkel in opposing the idea of joint euro zone bonds but he has also said the idea could one day resurface if European economic policy becomes better integrated.
Common sovereign bonds would drastically help peripheral euro zone nations by enabling them to borrow more cheaply, and should help ward off future debt crises in the bloc but they could ramp up yields for countries like Germany and France.
The report presented to Sarkozy suggests the shift towards a pan-European Treasury should start with Germany and France, and then widen thereafter to more euro zone countries that respect the fiscal constraints of the EU's Stability and Growth Pact.
It did not go into much detail on how the process would work and suggested it was something to think about for the end of the current decade.
"We propose considering the possibility for the medium term of creating a body that would be put in charge of shared management of the debt of euro zone states, which is the logical follow-on to creation of the single currency," it says.
"At first, issues by the European Treasury would be reserved to virtuous countries or limited to the amount of debt authorized under commitments to the stability pact," it said.
Even the first step could only be envisaged if Paris was able to convince Berlin of France's ability to keep its public deficit under control, says the report.
"Ultimately, the development of euro bonds would allow the union to arm itself with a borrowing capacity that benefits from the best signature," said the report, which noted that this was a goal also suggested by Italian finance minister Guilio Tremonti and Jean-Claude Juncker, head of the euro group, the club where euro currency finance ministers coordinate.
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