Plans emerge for ‘European Monetary Fund’

Plans for a European Monetary Fund emerged over the weekend as the ongoing debt crisis in Greece forces European politicians to rethink the euro area’s institutional architecture.

The loan-providing fund could be part of wider Franco-German scheme to reinforce economic co-operation and surveillance within the 16-member eurozone, with the European Commission signaling its readiness to come up with proposals.

“The commission is ready to propose a European instrument like this that would have the support of eurozone members,” the EU’s economic and monetary affairs commissioner Olli Rehn told the Financial Times Deutschland, in an article published on Monday (8 March).

Mr Rehn emphasised that any financial aid from a European fund would be linked to “strict conditions.” At present, the EU has a balance of payments facility to provide struggling non-eurozone countries with loans, but no mechanism to help the 16 sharing the single currency.

German finance minister Wolfgang Schäuble was the first to come out publicly with news of the radical plans. He said he would “present proposals soon” for a new eurozone institution that has “comparable powers of intervention” to the Washington-based International Monetary Fund.

The IMF gives out emergency loans to countries with troubled finances, although a number of EU governments would prefer to see a European solution to Greece’s current financing difficulties.

“We’re not planning an institution that would compete with the IMF, but for the internal stability of the eurozone, we need an institution that has the experience and power of the IMF,” Mr Schaeuble told the Welt am Sonntag newspaper.