Correspondent's Choice

This story about the proposed European Monetary Fund was published by EurActiv on 18th March 2010.

Policymakers are debating whether a proposed ‘European Monetary Fund’ would require changes to the EU’s Lisbon Treaty, as predicted by German Chancellor Angela Merkel. The EU executive believes it would, while politicians on the margins say it would not.

“Plans for a European Monetary Fund could imply that we indeed need to change the EU treaty,” a European Commission official told EurActiv.

However, socialist policymakers argue that a monetary fund, or as they have proposed it, a ‘trustee fund’, would not require any changes to the treaty. The prospect of treaty change would dissuade EU leaders from moving ahead and is reminiscent of recent referenda on the ratification of the Lisbon Treaty.

Socialists want ‘trustee fund’ without treaty change

The Party of European Socialists (PES) has come up with a parallel proposal that, they argue, would be a legitimate plan under the Lisbon Treaty’s current terms.

It is based on the EU’s balance of payments tool, which has helped non-euro countries to deal with their deficits.

A provision in the EU treaty for aid to any member state “threatened with severe difficulties caused by exceptional occurrences beyond its control” would provide the linchpin for such a fund, according to the socialists.

The proposal looks similar to a Eurobond as the Commission would lend its weight to borrow from the bond market to give the defaulting country a loan.

However, the Commission is not convinced by the PES proposal. The official noted that using the provision suggested by the socialists – aid for “exceptional circumstances” – would not provide the grounds for a systematic fund.

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