Tuesday

16th Jul 2019

Plans emerge for 'European Monetary Fund'

  • The euro area currently has no funding mechanism to help members at risk from defaulting (Photo: 1suisse)

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.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

"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.

Greece is currently struggling under the weight of its €300 billion-debt pile, with roughly €22 billion up for refinancing this April or May. But a lack of investor confidence in the country's economy has pushed up the centre-left government's borrowing costs and fueled speculation on the need for an eventual bail-out.

The Socialists in the European Parliament and Italian President Giorgio Napolitano have also called for the creation of a European fund.

"The European Central Bank [and] the European institutions are aware that there's something missing from our common tool box to tackle unforeseen and serious crises in one of the eurozone nations," said Mr Napolitano during a visit to Brussels last week.

Officials say a European Monetary Fund is unlikely to be ready in time to help Greece with its current predicament however, with Greek Prime Minister George Papandreou winning verbal support from French President Nicolas Sarkozy after a meeting between the two on Sunday.

"France is by the side of Greece in the most resolute fashion," said Mr Sarkozy. "The euro is our currency. It implies solidarity. There can be no doubt on the expression of this solidarity."

He did not outline any specific measures to help Greece however, but said his finance minister was working on a plan with her European colleagues.

Despite the announcement of stiff austerity measures last week, a meeting between Mr Papandreou and German Chancellor Angela Merkel on Friday also failed to result in the concrete proposal that Greece is hoping for in order to convince investors there is little chance of a default.

Mr Papandreou is scheduled to visit Washington on Tuesday for talks with President Barack Obama, and has indicated his government is prepared to turn to the IMF if greater details of European funding options are not forthcoming.

The latest Greek austerity measures include cutting civil servants' pay, freezing pensions and hiking some taxes, resulting in violent demonstrations on Friday as parliament voted to approve the tough new actions. A 24-hour general strike is planned for this Thursday.

EU hesitates to back France over US tariff threat

France has passed a new tax on tech companies that will affect US global giants like Facebook. Donald Trump has threatened retaliatory tariffs over it. The EU commission says it will "coordinate closely with French" on the next steps.

EU banks more vulnerable to shocks than feared

Eurozone banks, such as Deutsche Bank, might be much more vulnerable to a repeat of the 2008 financial crisis than EU "stress-tests" have said, according to a new audit.

News in Brief

  1. EU states threaten Turkey with 'targeted' blacklists
  2. Iran one year away from nuclear weapon, UK warns EU
  3. US trade war slows China's economy
  4. UK, France, Germany call for dialogue with Iran
  5. EU satellite system temporarily offline
  6. New flaw detected in Brexit app for EU citizens
  7. Italian coalition clashes over Russian financing
  8. Germany wants 'coalition of willing' to distribute migrants

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  2. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  3. Nordic Council of MinistersNo evidence that social media are harmful to young people
  4. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021
  5. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  6. Nordic Council of MinistersEducation gets refugees into work
  7. Counter BalanceSign the petition to help reform the EU’s Bank
  8. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  9. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  10. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  11. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  12. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North

Stakeholders' Highlights

  1. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  2. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  3. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  4. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  5. Nordic Council of MinistersNordic commitment to driving global gender equality
  6. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan
  7. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  8. Nordic Council of MinistersNordic talks on parental leave at the UN
  9. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  10. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  11. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  12. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership

Join EUobserver

Support quality EU news

Join us