The Director of the International Monetary Fund (IMF), Christine Lagarde, made six recommendations to strengthen the resilience of the euro area on Thursday 13 June in Luxembourg on the margins of the Eurogroup (see EUROPE 12274/1).
The finalisation of the banking union, through the introduction of a European Deposit Insurance Scheme (EDIS), is the number one priority, according to the international financial organisation.
Mrs Lagarde also welcomed the fact that the European Stability Mechanism (ESM), the permanent bailout fund for the euro area, would become the backstop of the Single Resolution Fund, but she called for the ESM to be activated promptly, if necessary, in a bank resolution. “This is not the case at the moment”, she said.
The IMF advocates accelerating work to make the capital markets union a reality. “Everyone agrees, but the issue does not seem to move forward”, said Mrs Lagarde, who said it would be appropriate to establish single reporting requirements for companies and establish common minimum bankruptcy standards.
Another recommendation: provide the future fiscal capacity of the euro area with a stabilisation function in the event of a macroeconomic shock. On Thursday evening, the Eurogroup was working on a euro area budget designed to support investment and stimulate institutional reforms.
Mrs Lagarde also advocated a “simplification” of European budgetary rules, of which the debt criterion would be “the anchor” and the operational tool would be the ratio of “public spending relative to GDP”.
On the multiannual financial framework, the IMF believes that the EU budget should provide greater incentives for Member States to implement structural reforms.
Finally, Mrs Lagarde considered that European rules to combat money laundering and terrorist financing should be applied in a more “centralised” manner. In response to the scandal implicating Danske Bank, the latest reform of the European financial supervisory authorities gave the European Banking Authority an increased role in this area (see EUROPE 12237/15). But its new president José Manuel Campa recently admitted to the Financial Times that the mandate granted would not solve the problem.
More information on the IMF's recommendations: http://bit.ly/2WFFlr6 (Original version in French by Mathieu Bion)