EU’s Rehn Says ’Serious Debate’ Is Needed on Debt Mutualization

European Union Economic and Monetary Affairs CommissionerOlli Rehn said policy makers must have a “serious debate” about proposals for common debt issuance among the 17 euro-area countries.

“We need a serious debate in Europe about the mutualization of public debt,” Rehn said today in an interview with Bloomberg Television in Brussels. “We have to move toward deeper economic integration, toward stronger economic governance so we minimize the moral hazard and ensure fiscal rigor - then we can more safely move toward further mutualization.”

“The basic principle is: no further mutualization of public debt without deeper economic integration of decision- making and control,” Rehn said.

Rehn said the European Central Bank’s longer-term refinancing operation have helped liquidity in the banking industry.

“We have avoided a credit crunch thanks to the LTRO, and the recapitalization of the European banking sector is going on in time,” Rehn said. “There is no reason to think there will be major concern on liquidity.”

To contact the reporter on this story: Caroline Connan in Brussels at cconnan@bloomberg.net

To contact the editor responsible for this story: Jones Hayden at jhayden1@bloomberg.net