IMF and/or EMF?

Amidst the on-going point-scoring between the Greek and German media there are some interesting ideas being discussed. German politicians, with Merkel’s hard line, hand washing stance for Greek finances, have in principle agreed to the creation of a complementary fund to the International Monetary Fund (IMF).

A European Monetary Fund (EMF) would allow Europe to ‘deal with their own problems’ through funding bail outs and imposing conditions. It would have a similar role to the IMF and this will be an issue for its longevity.

Moreover the actual structure of the EMF has a lot to be agreed. While the IMF has over 150 members, it is unclear whether the EMF would have 16 – the eurozone members – or 27 – the EU members. This is an important point because it directly involves the UK. If we continue with our ‘eurozone member problem only’ stance then the EMF would only have 16 members. This would be France’s best solution as they want to pursue a deeper integration of Europe.

Also the issue of funding and resources must be asked – how would the contribution structure be formed? Would a country only be able to take out only what they have paid in as a bailout?

However politically, one can see why Germany would be in favour. A strong emphasis on conditionality would allow stronger measures to adjust the fiscal situation. But the relationship between France and Germany itself could bring a halt to the idea before it has even begun.

None of this will be agreed in time for Greece to use but could serve as a useful tool later in Europe’s quest for deeper integration. However with the relationship between France and Germany being, at best, strained as well as the hard line approach of Merkel to Greece, the EMF may never come to fruition.

Will the IMF even support such an idea?

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