ECB's Nagel (speaking in his capacity as Bundesbank head) says that new reality calls for more EU debt, Politico reports; sees the benefits of forming a common, European, highly liquid, Euro-wide benchmark safe asset.

• Adds, “European debt is not a free lunch. And doubts about fiscal sustainability should not jeopardize the chances for improved common policies,”
• Nagel declined to provide a number on how much EU debt would be needed to create change.

Nagel's comments suggest a shift towards increased EU debt issuance as a means to enhance financial stability and create a liquid Euro-wide benchmark. This could be viewed as a more dovish stance previously held, indicating a willingness to accept higher debt levels, which may influence market expectations around fiscal policy and interest rates in the Eurozone. Traders should monitor how this affects fixed income markets and investor sentiment regarding EU fiscal policies.