Eurozone government bonds could in future be issued by a single authority with countries’ budget plans being approved by the bloc’s political leaders, a top European Central Bank policymaker has suggested. The proposal by Lorenzo Bini Smaghi, ECB executive board member, is one of the most radical yet for preventing a repetition of the eurozone’s debt crisis, and would involve a big step towards political integration in the 17-country bloc. It highlights the pressure the ECB is exerting for a bold response to the crisis by political leaders, who were meeting in Brussels on Friday.

Mr Bini Smaghi, whose proposals also include a ban on eurozone members defaulting, said eurozone politicians often did not understand how financial markets worked and warned that there was “insufficient capacity to ‘think European,’ that is to channel national decision–making in a broader framework”. He also urged greater centralisation of bank supervision in Europe to prevent national regulators favouring their own countries’ financial institutions – citing the risks Ireland’s banking system had created for the rest of the eurozone. Read more