We propose the creation of “Trichet Bonds” as a comprehensive solution to the current sovereign debt crisis in the EU area. “Trichet Bonds,” to be named after the ECB president Jean-Claude Trichet, will be similar to “Brady Bonds” that resolved the Latin American debt crisis in the late 1980s and were named after the then Treasury Secretary Nicholas Brady. Like the Brady Bonds, Trichet Bonds will be new long-duration bonds issued by countries in the EU area that will be collateralized by zero-coupon bonds of the same duration issued by the ECB. The zero-coupon bonds will be sold by the ECB to the countries issuing Trichet.
