Aug 5 (Reuters) - New York Stock Exchange parent ICE

has became the second index provider to leave the

European Union's joint debt out of its government bond indexes,

a further setback for the bloc's ambitions to be treated like a

state by investors.

Investors consulted who argued against the change said other

supranational or agency borrowers also issue debt on behalf of

governments, while not being governments themselves, ICE said in

a notice published on Friday.

Transparency and consistenty were also raised as concerns,

as classifying the EU as a sovereign would raise questions about

similar borrowers such as euro zone bailout fund the European

Stability Mechanism, ICE added.

"We will continue to monitor investor views on this

topic and would consider future consultations if consensus

builds in support of a change," the statement said.

Another index provider, MSCI, said in June it would leave

joint EU bonds out of its government bond indexes, leading to a

sell off in the debt. MSCI plans to revisit its decision next

year.

Meanwhile, for investors who do wish to include the EU's

debt in their benchmarks, ICE has created European Union bond

indexes, which include debt from euro governments and the EU

itself.

The EU, which expects to raise over 700 billion euros in

common debt with the backing of members states by 2026 to

finance a COVID recovery fund, has quickly become one of the

biggest borrowers in global bond markets.

EU officials have been pushing for the bonds, currently

classified as supranational debt, to be included in government

bond indexes.

The bloc has said index inclusion is the "single most

important remaining step" to align its debt with governments.

Funds tracking the indexes would effectively become forced

buyers, boosting demand and liquidity.