Merkel backs the idea of a European Monetary Fund

The Dollar Business Bureau

The German Chancellor Angela Merkel warmed to the idea of creating a combined European finance and the forming of a European Monetary Fund. This signalled a willingness on the part of the Chancellor to deepen the euro zone integration.

On the idea floated by her finance minister Wolfgang Schaeuble, Merkel said she supported “the very good idea” to turn the euro zone’s rescue fund, the European Stability Mechanism (ESM), into a European Monetary Fund. In May 2010, the European Financial Stability Facility was formed which was later called the ESM. The ESM works alongside the IMF in assisting Europe’s financial programmes.

The creation of ESM was a powerful step offering a powerful means to backstop sovereign debt markets and deal with sudden breaks in capital inflows during a crisis.

“It could make us even more stable and allow us to show the world that we have all the mechanisms in our own portfolio of the euro zone to be able to react well to unexpected situations,” she told reporters.

Signalling she is ready to press ahead with deeper European integration, Merkel said she did not rule out a French idea to have a common euro zone finance minister.

“I could also imagine a (combined) economy and finance minister,” she said, adding that this could allow for better coordination on budget and economic policies.

(Source: Reuters)