IMF revives idea of eurozone 'rainy day fund'
26.09.13 @ 09:29
Berlin - The idea of a eurozone-only fund, floated last year by EU leaders, has been revived in a study written by International Monetary Fund (IMF) staff and published on Wednesday (25 September).
"The simplest way of organizing temporary transfers to deal with adverse shocks at the country level would be through a common, dedicated 'rainy-day fund'," the paper argues.
"Such a fund would collect revenues from euro area members at all times and make transfers to countries when they experience negative shocks. With a dedicated and guaranteed flow of revenues, the fund might even be able to borrow at low cost to smooth the impact of downturns throughout the union," it says.
The paper notes that that the size of annual contributions to this fund could have been much smaller but triggered a higher level of "stabilisation" across the eurozone than the €700-billion-strong bailout funds set up since 2010, if only countries had set it up when the euro was introduced.
Unlike the bailout funds, this "rainy day fund" would provide support "before the shocks have turned into funding crises" and would not involve any sovereignty transfers.
The IMF paper however admits that any decisions to trigger transfers of money throughout the eurozone could be based on wrong data and would be "complex to implement in real time."
"The parameters of intervention could also be hard to communicate to the public, raising challenging issues of transparency and accountability," the IMF experts say.
And with transfers not linked to any conditionality, "free-riding" would remain a risk, with countries tempted to ignore any reforms as long as there is a rainy-day fund to help them out.
Last year, a similar idea was floated in a paper by EU Council chief Herman Van Rompuy and was labelled the "fiscal capacity" of the eurozone.
But even though leaders discussed it and France remains a strong supporter of the idea, Germany and other northern countries oppose such transfers.