World Economy

Lagarde Backs Creation of European Monetary Fund

Lagarde Backs Creation of European Monetary Fund Lagarde Backs Creation of European Monetary Fund

International Monetary Fund chief Christine Lagarde has no objection to plans to turn the eurozone’s bailout fund into a European Monetary Fund, she said in comments published on Saturday.

The European Commission has suggested transforming the role of the government-controlled European Stability Mechanism into a full-blown European Monetary Fund under parliamentary control and anchored in European Union law, which would also become a backstop for the eurozone’s bank resolution fund, Reuters reported.

The new body has strong backing from both the French and German governments.

“Why not?” Lagarde said in an interview with Swiss newspaper Tages-Anzeiger. “The crisis the eurozone went through showed that it needs a crisis management system that is independent, able to act quickly and that works according to strict rules. What that mechanism is called is secondary. If one wants to call it European Monetary Fund, then please.”

She also brushed aside the suggestion that the IMF’s role was being usurped in a region where it has been involved in bailing out Portugal, Ireland, Cyprus and Greece in recent years—often in exchange for oversight and painful reforms.

“We do not serve a region but 189 countries. That also includes eurozone countries. And if together they decide that other crisis mechanisms like the ESM are involved, that is in order,” she was quoted as saying.

Meanwhile, Finland supports the idea of expanding the European Stability Mechanism fund into a European monetary fund but does not back the European Commission’s proposal on having the European Parliament oversee it, Helsinki said on Thursday.

Finland’s center-right coalition government said it does not support the commission’s idea that a European monetary fund should become an EU institution overseen by the European Parliament.

“While the government takes a favorable view towards development of the ESM ... it is not in favor of approving the commission’s proposal for regulation”, Helsinki said in a statement.

“Instead, the ESM must be developed on the basis of the present intergovernmental treaty”. 

Finland is also opposed to proposals for a joint eurozone budget or common finance ministry.

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