(Repeats May 30 story without changes to text)
* Aims to boost single currency after 2010-12 debt crisis
* Impetus from France's election of former banker Macron
* Germans wary of any plan paying for poorer neighbours
* But Merkel, Macron keen to get more cohesive euro zone
By Jan Strupczewski
BRUSSELS, May 30 The EU executive will suggest
on Wednesday the euro zone might need to issue collective debt
and run a joint budget, among proposals for bolstering the
single currency that echo ideas from new French President
People familiar with the European Commission reflection
paper told Reuters the scenario of a finance minister managing
common revenue, spending and borrowing had been worked on for
many months in Brussels, but now appears a much more likely
option since centrist former banker Macron won power on May 7.
German conservatives dislike an idea they say means paying
for poorer neighbours. But Chancellor Angela Merkel, seeking
re-election in September, has welcomed Macron's victory and EU
officials said they hoped governments might start working on a
plan to forge a more cohesive euro zone from next year.
The Commission paper examines possible reforms to the bloc
after the 2010-2012 sovereign debt crisis that nearly destroyed
it and which triggered a wave of quick fixes for its weak spots.
While some problems have been addressed, there is a lot more
EU governments need to do to have an optimally functioning
Economic and Monetary Union (EMU), the Commission will say.
The document, part of a wider series on the future of the
European Union, comes as the EU is to start talks with Britain
on the terms of its withdrawal - a great setback to European
integration but one that will see the euro zone make up nearly
four-fifths of the EU's economy, up from two thirds today.
NO BLUEPRINT, JUST IDEAS
The Commission will avoid making any clear suggestions as to
the evolution of the single currency area, leaving it up to EU
governments to decide which of the ideas they like.
But it does say that in the later stages of deepening euro
zone integration, not least because it would require politically
difficult and time-consuming changes to EU treaties, the bloc
could establish a euro zone treasury.
The chairman of euro zone finance ministers, the Eurogroup,
could be in charge of such a new institution, the Commission
will say. But it will also note that the job of Eurogroup
president itself could be integrated into the Commission.
The treasury could manage what the Commission calls a
"macroeconomic stabilisation function" - EU jargon for a euro
zone budget to mitigate economic shocks, for instance used to
support investment, which is the first victim of a downturn.
Another option could be for such a budget to operate as a
re-insurance fund for national unemployment schemes during
economic bad times, when national budget deficits run high, but
this would require prior convergence of labour market policies.
Finally, the "stabilisation function" could be a rainy day
fund, regularly accumulating money and disbursing to cushion a
large shock and could even have right to borrow, though within
limits and with rules on saving money when times are good.
Financing for the euro zone budget could come from the euro
zone bailout fund, the wider EU budget, or from separate sources
like each country contributing a share of its GDP or tax income,
or from direct borrowing on the market.
Irrespective of the financing method, however, the euro zone
budget could not lead to permanent transfers or moral hazard or
be a crisis management tool - a role already assigned to the
euro zone bailout fund, the European Stability Mechanism.
While non-euro zone countries could have access to the
budget as well, it would only be available to those who are in
line with EU budget rules and recommendations for reforms that
lead to greater convergence of EU economies.
EUROPEAN SAFE ASSET
The treasury could also be allowed to borrow through what
the Commission calls a "European safe asset" - a bond
denominated in euros that could become a benchmark for European
financial markets once there is enough of it in circulation.
The Commission will say, however, the European safe asset
could be with full, partial or no mutualisation of the debt as
the topic of joint debt issuance in the euro zone is highly
controversial and vehemently opposed by Germany.
One idea in the paper that did not involve any mutualisation
of debt was for a private bank to buy a portfolio of euro zone
government bonds and issue its own bond backed by that
portfolio. Such a Sovereign Bond Backed Security (SBBS) could
have senior and junior tranches and provide a higher level of
safety for the investor, officials said.
Such a bond would help break the interdependency of banks
and sovereigns that led to the sovereign debt crisis. Another
idea to consider would be to end the risk-free status of
government bonds in bank regulations, officials said.
The paper will divide the process of deeper euro zone
integration into two stages. Until 2019 - the next European
parliamentary elections and the end of the current Commission --
the focus would be on completing processes already started.
The euro zone would agree on a European Deposit Insurance
Scheme (EDIS), and for the bailout fund to backstop a common
bank resolution fund in case it run out of money. It would also
tackle non-performing loans in the European banking system.
Also by 2019 the euro zone would make progress on a Capital
Markets Union - a project to create more sources of funding to
households and businesses on a market now dominated by banks.
In the second phase, between 2019 and 2025, the euro zone
could fully implement EDIS, consider creating the European safe
asset and the euro zone treasury, budget and finance minister.
(Reporting by Jan Strupczewski; editing by Mark Heinrich)