The benefits that a large risk-free euro-zone asset would provide

Unlike the United States, the euro zone does not offer investors a large risk-free asset, since the euro-zone public debt market is segmented along national lines. If the euro zone did offer a large risk-free asset, against a backdrop of high demand for risk-free bonds: The euro’s share of international foreign exchange reserves would rise, allowing the euro zone to borrow from the rest of the world at very low interest rates; The euro zone could issue these bonds to finance efficient public investments: energy transition, the development of companies in industries of the future. The euro zone as a whole is comfortably fiscally solvent. The mere adding-up of the euro-zone countries’ debt would therefore probably be sufficient to form a risk-free asset, without the need to build a more complex financial asset (for example by separating euro-zone bonds into senior and junior tranches).