So now Brussels's technocrats want to issue AAA rated securities backed with European subprime sovereigns? When will they ever learn?

With “subprime sovereigns” I do not intent to classify any sovereign in a derogatory way. I use the term strictly with reference to the fact that for the sovereigns’ creditors being able to collect their credits, some sovereigns seem, are, safer than others.

Sir, Jim Brunsden a Guy Chazan write: “Brussels has called for sovereign debt from across the eurozone to be bundled into a financial instrument and sold to investors as part of a plan aimed at strengthening the single currency area… the move would require regulatory changes to make the securities attractive. One idea would be to grant the bonds the same “zero-risk weighting” that applies to government debt in the EU, which would exempt them [banks] from capital requirements.”... “We see this in the form of preferential regulatory treatment.” “Brussels seeks new asset class of eurozone sovereign debt” June 1.

Amazing! The European Commission has not woken up to the fact that “preferential regulatory treatment” distorts the allocation of bank credit to the real economy, which is one of the prime reasons Europe got into trouble and finds it so hard to grow out of it.

Had banks needed to hold as much capital when lending to sovereigns than when lending to for instance “risky” SMEs and entrepreneurs, Greece would never ever, no matter how much it might have cheated with information, have been able to accumulate such massive amount of sovereign debt.

Were banks required to hold as much capital when lending to sovereigns than when lending to for instance “risky” SMEs and entrepreneurs, then the latter would have found it easier to satisfy their credit needs, and European growth and employment would be higher and foremost much sturdier.

When will the hubris filled obviously statist technocrats in Brussels ever learn? Europe, get rid of them!

“No problem can be solved from the same level of consciousness that created it” Albert Einstein.

@PerKurowski