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An Evolutionary Path Towards a European Monetary Fund

Author

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  • Gros Daniel

    (Centre for European Policy Studies, Brussels, Belgium)

Abstract

There is no need for Europe to replicate the International Monetary Fund (IMF). The European Stability Mechanism (ESM) can provide the backstop for sovereigns, even without a financial contribution from the IMF. In this sense, the ESM already constitutes to a large extent a ‘European Monetary Fund’. Other IMF activities, such as surveillance and policy coordination should remain with the European Commission, the Eurogroup and other existing bodies. The financial resources of the ESM will be required as a backstop only intermittently, in times of great financial market instability. The need for this will evolve as a function of the nature of financial markets and their cross-border integration. It is not possible to forecast with any precision when the next financial crisis might break out and what form it will take. Any evolution of the ESM should thus aim at enhancing flexibility in its instruments while clarifying its overall mandate (financial stability), rather than changing the details of the rescue mechanism or its institutional structure. The financial stability function of the ESM should be extended to the central institutions of the Banking Union, with an ultimate backstop for the Single Resolution Fund (SRF). Moreover, the ESM should be viewed as the natural instrument for unifying the euro area’s representation in the IMF.

Suggested Citation

  • Gros Daniel, 2018. "An Evolutionary Path Towards a European Monetary Fund," The Economists' Voice, De Gruyter, vol. 15(1), pages 1-15, December.
    • Handle: RePEc:bpj:evoice:v:15:y:2018:i:1:p:15:n:2
    DOI: 10.1515/ev-2018-0012
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    References listed on IDEAS

    as
    1. Gros, Daniel, 2015. "Puerto Rico and Greece: A tale of two defaults in a monetary union," CEPS Papers 10709, Centre for European Policy Studies.
    2. Belke, Ansgar & Gros, Daniel, 2015. "Banking Union as a Shock Absorber," Ruhr Economic Papers 548, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. repec:zbw:rwirep:0548 is not listed on IDEAS
    4. Gros, Daniel & Mayer, Thomas, 2012. "Liquidity in times of crisis: Even the ESM needs it," CEPS Papers 6787, Centre for European Policy Studies.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Mauro Paoloni & Massimiliano Celli, 2023. "The Covid-19 Pandemic and the Eurozone: A Reconnaissance of E.U. Financial Assistance to Counteract the Coronavirus’s Perfect Storm," International Journal of Business and Management, Canadian Center of Science and Education, vol. 16(7), pages 1-72, February.

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