What does the European Central Bank really think about an European Monetary Fund. The first public comments have been negative. Jürgen Stark, executive board member, argues in an article to appear in tomorrow’s Handelsblatt newspaper that such a fund would discourage fiscal discipline and violate eurozone principles.
But Mr Stark’s comments were his personal view, the ECB says. So far Jean-Claude Trichet, ECB president, has refused to comment publicly. After meeting global counterparts in Basel, Switzerland, earlier today, he said the idea had not been discussed at all. Last Thursday, he said the 22-strong ECB governing council did not have a position.
The impression I have is that there are divisions within the ECB that Mr Trichet has yet to smooth over. As I noted in a previous post,there are at many in Frankfurt who, in the wake of the crisis over Greece, would like to see more joined up thinking by eurozone political leaders – with a view to strengthening Europe’s 11-year-old monetary union. The ECB president himself seemed entirely happy with the pledge last month by eurozone leaders “to take determined and co-ordinated action, if needed, to safeguard financial stability in the euro area”. A European Monetary Fund would address the obvious weakness exposed by Greece in the eurozone’s “crisis management” capabilities.
No doubt, the devil will be in the detail. The ECB will want to study the implications for the “stability and growth pact,” which sets fiscal rules for eurozone member states, and for existing enforcement procedures. So, we will probably hear a lot in coming days about how an EMF can be no substitute for fiscal discipline. But, even if it could, I am not sure if the ECB would want to block Germany’s initiative.
