In a keynote speech, European Central Bank Executive Board member Philip R. Lane argued that the euro area’s financial architecture leaves an undersupply of euro-denominated safe assets, with German Bunds acting as the de facto benchmark but with an outstanding stock that is too small relative to euro area and global demand. He outlined how expanding the stock of common euro debt could improve liquidity and hedging services in euro markets and reinforce global trust in the euro. Lane noted that the wider universe of national sovereign bonds has become more resilient, with spreads less volatile and common factors playing a larger role, but residual scope for relative price movements means national bonds do not fully provide safe-asset services. EU-level bonds used to fund programmes such as SURE and Next Generation EU were described as broadly similarly priced to the GDP-weighted average of national sovereign curves but less liquid than French or German bonds, while the recently revised Eurosystem repo facility for central banks (EUREP) was presented as strengthening backstop euro liquidity provision for non-euro area central banks. On supply expansion options, the speech pointed to greater joint borrowing to finance European-wide public goods and common imperatives such as urgent funding for Ukraine, alongside potential governance innovations where programme participation does not match EU membership. Lane also discussed proposals to create safe assets from existing national debt, including a “blue bond/red bond” approach that would ring-fence national revenue streams to service commonly issued bonds, illustrated by an example of blue bonds at 25% of GDP requiring ring-fenced revenues of around 0.5% to 1% of GDP if average yields were 2% to 4%, and the sovereign bond-backed securities proposal that would tranche portfolios of national sovereign bonds so the senior slice could serve as a highly safe asset.
European Central Bank 2026-04-22
European Central Bank’s Lane sets out routes to expand euro-denominated safe assets
European Central Bank Executive Board member Philip R. Lane argued that the euro area faces an undersupply of euro-denominated safe assets and that expanding common euro debt could enhance market liquidity, hedging capacity and global trust in the euro. He highlighted the growing resilience but remaining limitations of national sovereign bonds, the role of EU-level issuance and the revised Eurosystem repo facility for central banks, and outlined options including greater joint borrowing and blue bond/red bond structures to increase safe asset supply.