Eurozone will create own monetary fund

Viliyana Filipova — Tue, 09 Mar 2010 06:07:28 +0000

France and Germany intend to launch a new project for economic cooperation and assistance within the euro area. This would include the creation of a European Monetary Fund, resembling the structure of the International Monetary Fund, said senior government sources quoted by the FT. Intentions are to create rules and tools for preventing the occurrence of instability in the whole euro area from the problems of a single country. Right now this is the situation with Greece, whose budgetary problems negatively affect the whole community. The first beginnings of that plan were announced by the finance minister of Germany Wolfgang Schäuble, who announced the intention to create a fund similar to the IMF. “I support greater coordination of economic policies within the EU and the euro area,” Schäuble said in an interview with German newspaper Welt am Sonntag. If France and Germany fail to reach agreement, which has lobbied for some time Paris, they probably will create the basis for the most radical reform of the euro in 1999 onwards. At present, neither Germany nor France Greece supported the proposal to have recourse to the IMF. This is another argument for establishing a European support fund, which, however, is unlikely to happen fast enough to help Athens, indicated by the FT.
“We plan to create a competitor to the IMF, but we need an institution to maintain internal stability in the eurozone, which has both the experience of the IMF and its mechanisms of action, if necessary,” said Schäuble. According to plans, the plan may include stricter penalties for members of the eurozone, which fail to deal with maintaining the agreed levels of budget deficits or who have excessive government debt. Intentions of these countries are not receiving funds from the EU Cohesion Fund, to temporarily lose their voting rights within the Council of Ministers, and even exclusion from the eurozone.

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Eurozone will create own monetary fund