European Central Bank policymaker Yves Mersch called on Sunday for the euro zone to pursue deeper integration, including a capital markets union that would enable a company in one country to issue a bond in another.
Describing Europe's Monetary Union as incomplete, Mersch said it would be wrong to sit back and leave the project in its existing form. Rather, developing the union "is a permanent undertaking," he said.
Mersch spoke three days after the ECB agreed a new bond-buying plan that will see chiefly national central banks purchasing bonds and taking on the risk of default. The deal has raised questions about whether ECB policy is still 'single' across the euro zone.
Mersch, who sits on the six-member Executive Board that forms the nucleus of the ECB's policymaking Governing Council, said capital-market integration would help spread risk across the currency union through the private sector.
"A truly integrated capital market would not only benefit the European economy because it would ensure an efficient and location-independent allocation of financial resources. It would also bring with it a greater distribution of risk," he said.
"...Spreading risk means that financial markets within a monetary union should actually function independently of national borders," he added, according to the text of a speech for delivery in Osnabrueck, Germany.
"Economic shocks can then be better absorbed because countries receive a certain amount of protection from the private sector."
Noting that a cross-border securities transaction costs at least 10 times as much in Europe as in the United States, Mersch called for harmonised regulation for securities in Europe and a harmonised legal framework for crisis management.
Mersch quoted former German chancellor Helmut Kohl as saying in 1992 that the Maastricht Treaty on European integration would lead to a United States of Europe, and concluded his speech by saying: "It is time that this affirmation resulted in action."