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French PM calls for 'rapid' consideration of an IMF for the eurozone

Text by News Wires

Latest update : 2010-03-11

French Prime Minister François Fillon (centre) called for European economic experts to work "rapidly" to examine the idea of a European version of the International Monetary Fund to help debt-stricken EU member states.

AFP - The idea of a European-style International Monetary Fund to help debt-stricken eurozone members should be examined "rapidly," French Prime Minister Francois Fillon said on Wednesday.
   
"We think this is an idea that should be looked at by experts rapidly in order to create the means with which the eurozone and its members can have at their disposal to respond to financial tensions that threaten monetary stability," Fillon said in a speech at Berlin's Humboldt University.
   
"But this form of support is only acceptable if the states confronted by financial difficulties make in parallel all necessary efforts to fix their structural problems and balance their books."

What is the proposed European Monetary Fund?
The idea of a European Monetary Fund was first floated to the press by German Finance Minister Wolfgang Schaeuble after the Greek debt crisis. Designed to shore up the Euro currency should a Eurozone member country become trapped by spiralling debt, the project would call for an in-depth modification of existing European treaties, which, ironically, currently state that the EU can only give emergency loans to non-euro members.
Backed in its infancy by German Chancellor Angela Merkel, the proposal has been met across Europe with reactions ranging from cautious support to downright opposition. The European Commission has indicated it will examine different proposals put forward in the coming months.


Fillon, who was later Wednesday due to meet German Chancellor Angela Merkel, said any nation receiving help from the new fund would have to make "commitments guaranteeing these efforts are not in vain."
   
Sparked by the Greece crisis, discussion of "EMF" has gathered steam in recent days after it was floated by German Finance Minister Wolfgang Schaeuble in a weekend newspaper interview.
   
Merkel said late on Monday the idea was "good and interesting" but that it would have to be accompanied by changes to the EU's governing treaties.
   
A day later, Merkel stressed the fund would only work if "sanctions" were imposed to penalise spendthrift states.
   
But other figures have been less than keen, including Axel Weber, Germany's central bank chief, who called the idea "unhelpful."
   
The European Central Bank's chief economist Juergen Stark warned that the scheme "could be very expensive, create the wrong incentives and finally, burden countries (that have) more solid public finances."
   
French Economy Minister Christine Lagarde called the idea on Tuesday an "interesting approach" but one that "does not appear to me to be the absolute priority in the short-term."
   
The plans are being developed as a possible way to assist Greece, and any other eurozone country that comes close to defaulting on its debt, and to get around the fact that European rules currently forbid any bailout.

Date created : 2010-03-10

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