MNI BRIEF: Greater Euro Use Would Need Swaps, Repos-ECB's Knot

The European Central Bank would need to offer more swap lines and repo facilities if it were to extend the international role of the euro, Dutch central bank chief Klaas Knot said in a speech at the IMF-World Bank spring meeting in Washington on Wednesday, noting that these are already provided to some eastern European countries.

While Knot has previously been “agnostic” as to boosting the international role of the euro, he now see himself as a “cautious believer,” though he warned that such a move would require internal fiscal discipline and should not be a standalone policy. (See MNI INTERVIEW: Fed Firm On Swap Lines, If Independent - Sheets)

The eurozone would also need to increase the supply of euro-denominated safe assets by issuing more debt, which would in turn help reduce member states’ borrowing costs. “But Higher EU debt should be hand on hand with lower national debt,” Knot said.