Central Bank governor Christodoulos Patsalides has backed the creation of a common European safe asset, arguing that it would deepen EU financial integration, strengthen the euro’s global role and help finance shared European priorities.
In an opinion piece titled The integration dividend of a European safe asset, the governor said the debate had moved beyond crisis management and had become a structural question for Europe’s long-term growth model, economic integration and strategic autonomy.
The governor argued that current economic, geopolitical and institutional conditions had created a strong case for issuing a common European safe asset to support European public goods, including competitiveness, green and digital transitions, defence capabilities and energy security.
A common European benchmark asset, the article said, could act as market infrastructure for a deeper and more integrated European economy.
The governor said such an asset would improve liquidity across Europe by creating a deep and unified benchmark yield curve, comparable in function to the role played by U.S. Treasuries in global markets.
Europe still operates with fragmented sovereign bond markets, different risk premia and incomplete financial integration, the article said. The absence of a sufficiently deep common safe asset has held back the development of truly integrated capital markets.
The governor said large-scale, standardised and liquid European safe assets could support collateral markets, repo activity, derivatives pricing and institutional portfolio allocation. They could also help the development of digital capital-market infrastructure, including tokenised securities, programmable settlement systems and interoperable collateral frameworks.
The article said the tokenised form of debt would complement work by the European Central Bank on distributed ledger technologies, including the Appia and Pontes projects, and align with the Bank for International Settlements-led Agora project on cross-border wholesale finance.
The governor said a European safe asset would also support the Savings and Investments Union by providing the collateral base, pricing benchmark and liquidity pool needed for integrated capital markets.
In turn, deeper capital markets would strengthen the safe asset by broadening the investor base, increasing market depth and supporting greater issuance capacity, creating what the governor described as a mutually reinforcing cycle.
The article said this could help mobilise Europe’s savings towards productive investment and support venture capital, start-ups, innovation and productivity.
The governor also argued that Europe’s challenge is not only innovation but scale, saying European firms often succeed technologically but struggle to expand across the continent because of fragmented financing, production and market access.
A deeper and more liquid European capital market anchored by a common benchmark asset would support larger pools of institutional capital, long-term investment and lower cross-border financing costs, the article said.
The governor said a European safe asset would strengthen the Banking Union and financial stability by further diversifying bank balance sheets, improving collateral quality and liquidity, and supporting the development of pan-European banking institutions.
The article noted that in the United States, around 70% of corporate financing comes from capital markets, while in the European Union around 70% of corporate financing is provided by banks.
A common European safe asset would also strengthen the international role of the euro, the governor said, arguing that reserve currencies require not only economic size but also deep and liquid safe-asset markets.
The article said Europe already has several structural strengths, including a market of about 450 million people, 33.4 million companies, the world’s largest trading bloc, strong institutions, an independent central bank and the euro’s position as the world’s second most important reserve currency, with a 20% share.
However, the governor said Europe still lacks a benchmark asset of sufficient scale and uniformity to match its economic weight.
A European safe asset would not only be a European public good but also a global public good, the article said, by providing international investors, reserve managers, sovereign wealth funds, pension funds and financial institutions with another source of high-quality liquid assets denominated in euros.
The governor said common European debt could finance shared strategic priorities, including common defence initiatives, the green transition, climate adaptation, health preparedness, cross-border energy infrastructure, digital transformation and artificial intelligence initiatives.
The article proposed a permanent European Safe Asset Programme as an institutional framework for regular issuance of common European debt to finance shared strategic priorities.
Building on the experience of NextGenerationEU, such a programme could support investment in areas of clear European added value, the governor said.
The article noted that several mechanisms could be used, including jointly issued Eurobonds, diversified sovereign bond-backed securities, common investment vehicles, supranational issuance linked to strategic investment programmes and hybrid institutional arrangements.
The governor said the EU’s objectives would be best served by a two-pillar architecture separating debt issuance from capital deployment.
Under that approach, one vehicle would focus on creating and operating a deep and liquid safe-asset market and advancing bond-market infrastructure. A second vehicle would channel capital towards strategic investments and common public goods.
The governor argued that this would support the gradual construction of what the article called a European public-goods union and help Europe compete more effectively with large-scale economic actors such as the United States and China.
At a deeper level, the article said, the safe-asset debate concerns the future of Economic and Monetary Union itself. While the euro created a common currency, Europe’s financial system remains only partly integrated.
A common safe asset would help bridge the gap between monetary union and a more integrated financial union, while reducing market fragmentation and improving the transmission of monetary policy across the euro area, the governor said.
The article said 82% of citizens living in euro-area countries support the euro, according to the European Commission’s Eurobarometer, while 78% of EU citizens favour common funding for common tasks, according to a European Parliament survey.
The governor concluded that the benefit of a European safe asset would not come only from lower borrowing costs or stronger market liquidity, but from its potential to drive broader European integration.