Recent years have seen important steps taken towards market integration and greater efficiency in European government bond markets. At the same, and with the euro area increasing in size , European government bond markets remain fragmented.
The 10th anniversary of European Economic and Monetary Union is therefore an appropriate time to reflect not only on the success of a common European currency but also to consider the gains that can be won through further market integration. As such, it presents an opportunity to study and debate larger scale initiatives such as a possible common European government debt instrument.
The market turmoil arising from the credit crisis has widened spreads between European sovereign issues and increased the liquidity premia paid by individual issuers. The crisis has served to demonstrate more than ever the value of large and liquid benchmarks in government debt securities.
Debate on a common European government debt instrument tends often to highlight political and legal obstacles without thoroughly investigating the tangible benefits at stake. The EPDA hopes that this paper will help to provide guidance on the shape that any future common debt instrument might take. The EPDA wishes to thank those that contributed to the paper either directly or indirectly through their willingness to be consulted: EPDA Member Primary
Dealers , international ratings agencies (Fitch Ratings, Moody’s, Standard & Poor’s) investors and academics.