Jyrki Katainen, Finland’s prime minister, today (Thursday) called for euro-zone countries to issue covered bonds, with possible support from the EFSF or ESM, as a “concrete measure” to address the sovereign debt crisis as EU leaders met in Brussels.

The Finnish government has taken a hard line in bail-out negotiations with Greece and sought collateral for its share of rescue measures. Katainen’s proposal today would take such moves a step further.

“As one practical step vulnerable Member States could issue covered bonds to access markets with lower interest rates,” he said. “Covered bonds are backed by government assets or by tax revenue ear-marked to service the bonds.

“This is what Finland did in a difficult economic situation in the 1990s and it is standard practice for banks today.”

Katainen made his comments as European Union leaders met in Brussels for a summit today and tomorrow (Friday).

“The EFSF (European Financial Stability Facility) or ESM (European Stability Mechanism) could stand ready to intervene in the primary market to facilitate successful issuance of the covered bonds,” said Katainen. “This together with strong policies by the Member States concerned would be important to ensure the stability of the euro area.”

No further details of how such issuance might work were given.