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One of the eurozone’s most senior policymakers has backed plans to bulk up the powers of the bloc’s bailout fund, transforming it into a “European Monetary Fund”.
Jeroen Dijsselbloem, president of the Eurogroup, said the current European Stability Mechanism should take the lead in future eurozone rescue programmes and carry out economic assessments of its member state economies.
The ESM, which was set up during the eurozone’s crisis years as a permanent bailout fund, has tended to act in partnership with the International Monetary Fund over cash-for-reform programmes in the continent.
Mr Dijsselbloem’s comments come as the IMF has yet to fully come on board with Greece’s latest third bailout programme nearly two years after an €86bn agreement was signed with EU creditors to bring the country back from the brink of a chaotic “Grexit”.
Addressing MEPs in Brussels, the finance chief said the creation of an EMF would mean the IMF may no longer be involved in future eurozone bailouts.
“I am not excluding them being part of future programmes but I feel the ESM can play a leading role and develop in that direction”.
Any expansion of the ESM’s remit could include giving it a “broader preventive mandate” that would see it monitor countries’ economic policies and issue macroeconomic reports – aping the IMF’s so-called Article IV annual assessments, he said.
But Mr Dijsselbloem rejected ideas floated in Germany that the ESM could take on formal budget policing powers currently exercised by the European Commission.
“The Commission should continue in its view as keeper of the pact,” he
said, in reference to eurozone rules on national debt and deficits.
As part of the debate on revamping eurozone institutions, the Dutch finance chief has commissioned a report into the performance of bailout programmes administered by the ESM and previous, temporary, eurozone bailout funds. The European Commission will also publish a report on the next stages of EMU reform at the end of next month.
Thursday marked Mr Dijsselbloem’s first appearance in front of parliamentarians after being excoriated last month for saying some countries could not expect financial support having wasted money on “booze and women” in the run up to the crisis.
Mr Dijssebloem told MEPs his comments on the need for solidarity had been “unfortunately” linked to the eurozone’s crisis years.
“The last thing I want to do is cause new divides”, said the Dutch finance minister whose domestic Labour party suffered a punishing electoral performance last month.
Commenting on Greece, Mr Dijssebloem said he supported a move to lower Greece’s budgetary targets over the next decade. As it stands, Athens is required to maintain a primary budget surplus of 3.5 per cent for 10 years after 2018.
With the Greek government greatly over-performing on its fiscal targets last year, Mr Dijssebloem said the 3.5 per cent requirement “should be shortened”.
Bailout monitors have returned to Athens this week in order to lay the groundwork for the release of the country’s latest injection of bailout cash to stop Greece defaulting on its creditors this summer.
With the economy having fallen back into a slump, Mr Dijsselbloem said a bailout deal “needed to be agreed in May”.
Image via AP