EU rescue fund: Does it mark the beginning of a transfer union?

Does the euro rescue fund, which was created last year, violate fundamental principles of the Maastricht Treaty? Is the EU about to establish a transfer union? Wolfgang Schäuble, German Federal Minister of Finance, presents the position of the federal government, namely that the creation of the European Financial Stability Fund (EFSF) and current work on establishing a permanent European Stabilisation Mechanism (ESM) is in no way the beginning of a transfer union. It was clear to the federal government from the very beginning that the EFSF can only be an interim solution. This is why the government favours a concept of a permanent ESM for the eurozone, which is meant to supplement the stricter measures of fiscal- and economic-policy monitoring within the framework of the Stability and Growth Pact in order to safeguard the long-term financial stability of the eurozone. The government's concept consists of three components: an economic and fiscal-policy adjustment programme, appropriate contributions of private creditors as well as an inter-governmental financing instrument. Jürgen Stark, member of the Executive Board of the European Central Bank stresses that the existing contractual foundations of the monetary union, particularly the no-bailout clause and the prohibition of financial transfers, must not be circumvented by the new mechanism. Otherwise there is the danger of a weakening of the stability-pact basis of the euro with unforeseeable economic and political results. Clemens Fuest, Oxford University, outlines a strategy for overcoming the crisis. This strategy focuses on debt restructuring, but also temporarily integrates elements of community responsibility in cases of insolvency until the current sovereign debt crisis is resolved. For Christian Fahrholz, University of Jena, aspects of an implicit transfer union with quasi joint and several liability are already visible today. Michael Eilfort and Verena Mertins of the Market Economy Foundation (Stiftung Marktwirtschaft), Berlin, reject the institutionalisation of the rescue fund. They question whether the desirable stabilisation of the euro entails that a blank check be granted in fact to every member of the eurozone. In the end a community of debtors and a transfer union does not mean more solidarity but simply more false incentives.