At today’s European summit, the Heads of State or Prime Ministers will need to discuss the Commission’s proposals regarding the outline of the future new “eurozone”.
The European Commission proposes to create a European Monetary Fund that could replace the IMF in assisting eurozone countries in difficulty.
Europe, integrated but at multiple speeds, would thus make a new leap forward.
The idea of a European Monetary Fund (EMF), already suggested multiple times in the past, is generally accepted among major European capitals. However, the Commission’s proposal could clash with the German perspective on such an institution. Berlin supports the creation of an EMF, but would like it to remain intergovernmental and to exercise stricter control over budgetary policies.
Brussels proposes to create this EMF based on the European Stability Mechanism (ESM), an intergovernmental crisis management institution created by the eurozone during the financial crisis. The new body would maintain the ESM’s architecture and prerogatives but would become part of the community framework.
The fund would also take on the role of “lender of last resort” for distressed banks if the banking resolution mechanisms have not functioned sufficiently.
The Commission has also published a “communication” on the budgetary instruments that the eurozone could adopt. It envisions the creation of a budgetary line with several functions: to stabilize the eurozone in the event of an economic shock, to support the pre-accession of future members, and to aid in the implementation of structural reforms.
