In Watershed Event, Europe Unveils Plan To Securitize Sovereign Debt

[Swordsmyth]

In the latest attempt by Europe to create a common bond market, a European Commission paper on the future of the euro seen by the Financial Times, advocates the launching of a market of “sovereign bond-backed securities” — packaging different countries’ national debt into a new asset.
The logic is simple: combine all the debt from strong and weak countries into one big pool, eliminating the outliers on both sides, then tranche it out, and sell it based on required yield returns.

Officials hope that the plans would boost demand for debt issued by governments with relatively weaker economies, and encourage banks to manage their risks better by diversifying their portfolios, while avoiding old political battles over whether the currency bloc should issue common bonds.

Why now? Because as has been Germany's intention all along, Berlin has been hoping to create a fiscally intergrated Europe (with a shadow government in Berlin of course), call it a (quasi) "fiscal union", and which is much more stable and resilient than the current iteration which is only as strong as its weakest link. Securitizing the sovereign debt resolves virtually all outstanding problems.

The commission paper is the latest in a series of efforts to kick-start integration inside the eurozone. Such integration efforts have stalled since financial markets became convinced in 2013 that the European Central Bank would not allow the eurozone to break up. The last successful integration project was the creation of an EU banking union three years ago.


More at: http://www.zerohedge.com/news/2017-0...sovereign-debt

[timosman]

[goldenequity]

hahaha... after the 2008 bundled mortgage collapse...
they think they can (again) try to 'bundle, package & hide'
the inevitable crap sovereign debt defaults...
(aka package Greek debt w/ German debt and sell it as AAA).
Who would be stupid enough to buy it? Am I getting this right?

[goldenequity]

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[devil21]

Ummm....isn't the ECB monetizing all of the various sovereign bonds already to the tune of about 80 billion euros a month? I think the current euro system has to collapse and reset (clear the insolvencies of the bankrupt zombie governments, many of which declared bankruptcy in 1933 at the same time the US govt did) before there's any realistic chance to securitize all of the new debt into a viable single package for markets.

[r3volution 3.0]

Ummm....isn't the ECB monetizing all of the various sovereign bonds already to the tune of about 80 billion euros a month? I think the current euro system has to collapse and reset (clear the insolvencies of the bankrupt zombie governments, many of which declared bankruptcy in 1933 at the same time the US govt did) before there's any realistic chance to securitize all of the new debt into a viable single package for markets.

Not sure what the current count is, but yes, they've been doing that on and off, in varying amounts, for about 7 years.