Wolfgang Schäuble, Germany’s finance minister, is winning support for his European Monetary Fund idea. Going further than in an article he wrote for the Financial Times, Lorenzo Bini Smaghi, an executive board member at the European Central Bank, has told the Netherlands’ NRC Handelsblad, that Mr Schäuble’s proposal “seems very reasonable” and “deserves to be explored further”. His comments contrast with the much more sceptical tone taken by Jürgen Stark, his executive board colleague, and Axel Weber, Germany’s Bundesbank president.
Except the ECB has clearly taken a disliking to the proposed title. The words “monetary fund” obviously suggest the institution’s primary objective would simply be to dish out billions of euros to countries in trouble (Greece) – something to which the Frankfurt-based institution would object strongly. Mr Bini Smaghi sees its role of differently. “Not only must the management of the euro be enhanced, and given more powerful means for preventive action and sanctions, but we also need a financial mechanism. So that we are ready when the euro is attacked,” he said in the interview.
Germany’s Bundesbank is getting jumpy, and I am not sure it is doing Axel Weber, its president, many favours.
The cause of its agitation is the proposal for a European Monetary Fund by Wolfgang Schäuble, the country’s finance minister. Jean-Claude Trichet, European Central Bank president, has said the EMF idea is worth considering if it would make existing arrangements more effective. But the Bundesbank has set itself squarely against the proposal, which is aimed at making the eurozone better equiped to control future crises, such as currently being experienced (traumatically) over Greece’s finances. The proposal is simply a distraction at this stage, the Bundesbank believes.
The weekend’s suggestion from Germany for a European Monetary Fund is extremely confused. Angela Merkel, German chancellor, has just said she supports the idea in principle, but the details need to be worked out. Exactly. I have not been able to find anyone today who can explain what the EMF is supposed to do. It seems a classic solution in search of a problem.
So, I predict the idea of an EMF will go nowhere fast. But as my colleague, Alan Beattie, pointed out in the most thoughtful comment I’ve seen on it today, it’s not the first time the acronym EMF and the word “unbelievable” have been used together.
While Germany and France might have other ideas for an EMF, it is not clear they are any more believable: