Monday

22nd Oct 2018

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 leaders worried about Italy's budget

Some EU leaders warned that Italy's plan to boost its budget spending despite the second largest debt in the eurozone, could hamper efforts to reform the single currency's framework.

EU warns Italian populists on Greek-type crisis

The EU commission president urged Rome to rethink its budget plans to avoid a Greek-style euro crisis. Meanwhile, Italy's finance minister tried to calm his colleagues in Luxembourg.

Airbnb agrees to clarify pricing for EU

The justice commissioner says the accommodation-rental website will better inform users about prices, and about the legal status of their 'hosts'. Facebook, however, could face sanctions if it doesn't comply with EU rules.

Stakeholders' Highlights

  1. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  2. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  3. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  4. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  5. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  6. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  7. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  8. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  9. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  10. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  11. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs
  12. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All

Latest News

  1. Lone Merkel announces Saudi arms ban
  2. Dodgy regime lobbying is below the EU's radar
  3. Bannon's The Movement to launch with January summit
  4. What Italy's budget row is actually about
  5. EU preparing 'concentration camps' for migrants in Africa
  6. Poland to respect EU injunction on judicial purge
  7. EU votes on Facebook and plastic This WEEK
  8. Top EU banks guilty of multi-billion tax fraud

Stakeholders' Highlights

  1. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  2. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  3. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  4. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  5. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  6. Mission of China to the EUChina: Work Together for a Better Globalisation
  7. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  8. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  9. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  10. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  11. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  12. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs

Join EUobserver

Support quality EU news

Join us