Euro Zone

New Debate Over European Monetary Fund

Bundesfinanzministerium in Berlin
Germany's finance ministry reflects on a European Monetary Fund. Source: DPA

Emmanuel Macron’s victory in the French presidential election has breathed new life into discussions about a possible European Monetary Fund, or EMF, to tackle future crises. The pro-European president has talked to Chancellor Angela Merkel about the subject and Finance Minister Wolfgang Schäuble and his French counterpart Bruno Le Maire have set up a working group to discuss the matter.

The EU Commission is to present a proposal on Wednesday this week on strengthening the euro zone, which will focus on completing the European banking union and consolidation of the fiscal and economic union. The paper will also call for a more democratic legitimization of the euro zone.

The German government has very clear ideas how to proceed. The finance ministry and Ms. Merkel have long wanted to to expand the European Financial Stability Facility to turn it into a European Monetary Fund. A German-French working group is now discussing details of the plan, and must strike a balance between German views on debt and French views on investment.

A study by the IW think tank in Germany suggests this fund could set up within existing EU legislation.

Mr. Schäuble is keen on the idea of strengthening the European Financial Stability Facility and having it take over responsibility for deficit criteria from the European Commission, not least as the body is currently headed by a German, Klaus Regling.

Future rescue operations by an EMF could be tied to the condition that the crisis-hit country in question firstly restructure its debts. Before the country could receive support loans, the terms of its existing loans could be extended. That would mean holders of government bonds bearing some of the costs of a rescue operation.

But these ideas are likely to meet with resistance from southern European states. The IW study author Jürgen Matthes said that: “It is an illusion to believe that an EMF could be custom-made to suit German interests and strengthen adherence to rules and financial market discipline.”

He said it is more likely that compromises with France will lead to the EMF also being an institution for more risk sharing and communitization of debt.

The German finance ministry is also concerned that other euro states could insist on using the financial stability fund as a reserve for the bank liquidation fund. The IW points out that this could be problematic as the risk involved in saving a bank is greater than that of an aid program for states.


Ruth Berschens heads Handelsblatt’s Brussels office, leading coverage of European policy. Martin Greive is a correspondent for Handelsblatt based in Berlin. Jan Hildebrand leads Handelsblatt’s financial policy coverage from Berlin and is deputy managing editor of Handelsblatt’s Berlin office. To contact the authors:, and

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