Brussels, 08/03/2010 (Agence Europe) - The idea of a European Monetary Fund is making progress as a possible measure to strengthen economic coordination in the Eurozone and subsequently learn the lessons of the Greek financial crisis. On Monday 8 March, the European Commission declared that it was prepared to propose the setting up of such a European monetary fund, following the declarations in this direction made by Olli Rehn in the German daily Financial Times Deutschland dated 8 March. The Commission proposals will be made “during” the Spanish presidency of the Council of Ministers of the EU. The Greek crisis, however, will be tackled with instruments that already exist.
The spokesperson for Mr Rehn, Amadeu Altafaj Tardio, confirmed that the Commission, “is ready to propose the creation of such an assistance mechanism” if the euro zone countries agree. The creation of this instrument will be subject to very strict conditions. At the same time, the Commission is preparing a communication on, “resources and instruments” that will facilitate the, “strengthening of economic policy coordination in Eurozone countries and supervision of member states”, explained the spokesperson. The spokesperson did not want to give any more details about, “possible instruments that have not yet been outlined”.
These subjects linked to improved economic governance in the Eurozone are not officially on the Commission's agenda for Tuesday 9 March but Commissioner Olli Rehn is committed to informing his counterparts during the ongoing discussions, within the perspective of the adoption later of the communication on strengthening the coordination of economic policies. The Commission said that, “there is a certain room for manoeuvre to improve economic governance in the euro zone”. The Commission is hoping to use the new article contained in the Lisbon Treaty (Article 16), which will allow the Commission to elaborate proposals.
This process does not intend to tackle the immediate problems in Greece, explained the spokesperson for Mr Rehn, but rather, “draw the lessons” on the Greek episode in an effort to prevent such a situation arising in the future. The European Commission spokesperson provided assurances that they would work in close corporation at, “Eurogroup and with the European Central Bank and International Monetary Fund”.
The budgetary crisis in Greece, following the revelation of a much greater public deficit than expected, has led to a debate on the necessity of the Eurozone possessing a future mechanism for financial assistance. This would constitute a revolution for the Economic and Monetary Union launched in 1999. So far, only European Union countries that are not members of the zone can benefit from the emergency loans. With the crisis, countries such as Latvia, Hungary and Romania have benefited from it. Such a mechanism has not been planned for the Eurozone due to it being blocked by Germany, which saw it as a pretext for a lack of budgetary discipline for the countries using the same currency. The Greek crisis, however, has changed things. The German minister of finance, Wolfgang Schäuble, stated that, “Eurozone stability requires that we have an institution that benefits from the experiences of the IMF and has the same powers of intervention”. Together with France, he is soon intending to develop proposals in this direction. How this will work exactly, remains to be worked out. European Monetary Fund loans would be subject to strict conditions and would have to make cuts in the budget or sometimes make unpopular reforms, as similarly demanded by the IMF, warned Mr Rehn. The Germans will stress this point. According to the Financial Times Deutschland, Berlin would even like to reinforce the arsenal of sanctions against euro zone countries that have imposed too little financial discipline on their budgets: suppression of regional aid from Cohesion Funds, withdrawal during at least a year of voting rights during EU ministerial meetings. Other quarters are highlighting the financial aspect of such funds. European Socialist are therefore proposing that a fund is managed by the European Investment Bank (EIB) or the European Commission.
Belgium has just proposed common management by member states of their debt, with more solid economies helping those that are more fragile. Euro group president, Jean-Claude Juncker, has said he is in favour of setting up a European ratings agency to assess the quality of state lending, in an effort to counter the all-powerful Anglo-Saxon rating agencies. (L.C. / transl fl)