Germany’s finance minister first put the proposal on the table seven years ago: “Euro zone members could also be granted emergency liquidity aid from a ‘European monetary fund’ to reduce the risk of defaults,” Wolfgang Schäuble wrote on March 11, 2010, in the Financial Times. “A good and interesting idea,” Chancellor Angela Merkel quickly responded.
The idea was born out of necessity: In order to save the euro, the currency union had to rescue its member Greece from going bankrupt. In the end, Mr. Merkel decided upon another, smaller solution: the European Stability Mechanism (ESM), popularly known as the euro zone’s bailout fund, was born. It became Greece’s largest creditor by far.
For a long time, there was no further talk of a European Monetary Fund – until the start of this year, when Mr. Schäuble suddenly revived it. The long-time member of Ms. Merkel’s Christian Democratic party is now calling for turning the ESM into a European Monetary Fund, or EMF – and the chancellor is once again covering his back.