Lorenzo Bini Smaghi, an executive board member at the European Central Bank (ECB), on Friday proposed the establishment of a supranational entity in the euro area to issue government bonds with budget plans subject to approval by member states.

At an event in Lucca, Italy, Bini Smaghi said the best way to prevent euro countries from defaulting was to lay down rules that placed a constitutional weight on acceptable debt levels. He said one way to ensure such rules were binding was to empower "a