Martin Blessing, chief executive officer of Commerzbank AG, recommended introducing joint euro bonds as a method to pressure euro-zone governments to make further changes to repair their economies.
European Central Bank President Mario Draghi’s pledge to do whatever it takes to protect the euro “was correct at the time,” Blessing said at a banking conference in Frankfurt today. “The question is now, what are we going to do in the long-term?”
In an opinion piece in today’s German newspaper Handelsblatt, the CEO of the nation’s second-largest bank recommended converting the European Stability Mechanism into a European debt agency. European countries could use financing of as much as 25 percent of their gross domestic product from the new agency, using value-added tax income as a security, he wrote.
Draghi’s strategy to defend the euro has had “a slight side effect” of keeping interest rates “very, very low,” Blessing, 51, said at the banking conference.
“That means pressure to push through structural reforms when interest rates are high is gone again,” he said. “Therefore, we need to consider how do we create a system in which the capital market uses interest-rate differences to apply pressure.”