FRENCH MINISTER for finance Christine Lagarde has played down the possibility of creating a European Monetary Fund (EMF), saying it was a long-term suggestion and that other approaches to helping struggling euro-zone members should be explored.
The idea of establishing such a fund, which could provide loans to euro-zone members in difficulty, was raised at the weekend by German finance minister Wolfgang Schäuble and has provoked strong reactions.
German chancellor Angela Merkel said the idea was “good and interesting” but added that questions remained over how it would work. The European Commission said yesterday it would prepare a proposal on such a fund by the end of June.
Dr Merkel has signalled that she is prepared to push for a change to EU treaties to secure the sort of fund envisioned by Berlin.
However, France is wary of any EMF proposal that would require treaty changes, as there is little appetite in Paris for further institutional wrangling after the protracted sagas over the EU constitution and the Lisbon Treaty.
“A polemical debate on this wouldn’t be helpful right now,” Ms Lagarde said in Paris yesterday.
Consideration should not be “limited to a European Monetary Fund”, she said, adding that the idea of such an EU lender of last resort was interesting but “does not appear to me to be an absolute priority in the short term”.
“Other ideas need to be studied and those that respect the Lisbon Treaty are preferable,” Ms Lagarde said.
Berlin’s proposal has already been shot down by two of the country’s highest financial authorities: the Bundesbank and Jürgen Stark, the German chief economist of the European Central Bank (ECB).
“Countries that have not observed the rules of monetary union, that have profited from the euro without taking on the duties that go with it, should not be rewarded for this misbehaviour,” wrote Mr Stark in the Handelsblatt business newspaper.
Financing an EMF could be a burden for countries with solid finances while creating “false incentives” for others, he added.
Bundesbank president Axel Weber, the likely future head of the ECB, said that he was doubtful about the timing and the direction of the German suggestion.
