The eurozone must consider creating a new security similar to a U.S. Treasury bond to help diversify the assets held by banks and improve liquidity in the bloc, the European Commission said in a discussion paper on the future of the currency area.

The European Systemic Risk Board is discussing the possible development of so-called sovereign bond-backed securities, which would involve the packaging of sovereign debt into a new asset.

"A European safe asset, denominated in euro and sizeable enough to become the benchmark for European financial markets, could create numerous benefits for financial markets and the European economy," the EU executive body said, noting that the euro area is an economy as large as the U.S. but does not have an area-wide safe asset similar to U.S. Treasury bonds.

The EC recognized that a European safe asset would raise a number of complex legal, political and institutional questions, which it said would be explored in great detail. It acknowledged that the issue of debt mutualization in the euro area is "heavily debated."

The authorities are also looking into the possibility of changing the regulatory treatment of sovereign bonds to reduce banks' exposure to a sovereign debt crisis.

Other options for the eurozone for the period from 2020 to 2025 include the creation of a European monetary fund and a euro area treasury, the appointment of a full-time permanent chair of the eurogroup and the integration of remaining intergovernmental arrangements in the EU legal framework.