Under this scheme the Greek contribution to an EMF would have been 0.65% of GDP in 2009.Any member country could call on the funds of the EMF up to the amount it has deposited in the past (including interest), provided its fiscal-adjustment programme has been approved by the Eurogroup of euro-area finance ministers.
The proposed EMF would tilt the balance in the opposite direction.
If a euro-area country loses access to market financing, the EMF could step in and offer all holders of debt issued by the defaulting country an exchange against new bonds issued by the EMF.
He offered few details about how an EMF would be financed or how it would operate.
The Gros-Mayer proposal is a diversion attractive only to Europeans who obsess over moral hazard concerns.Second, setting practical considerations aside, if the EMF were tougher than the IMF is on average in terms of its economic and financial conditions, then Euro area countries would prefer to go to the IMF for assistance.
For an explanation of this roundtable, click here.The case for a European Monetary Fund (EMF) that Daniel Gros and Thomas Mayer make is reminiscent of Japan's proposal for an Asian Monetary Fund in September 1997.
Any call on EMF funds above this amount would be possible only if the country agreed to a tailor-made adjustment programme supervised jointly by the European Commission and the Eurogroup, and on condition that the EMF ranked ahead of all other creditors.The EMF's other job would be to deal with the aftermath of a sudden withdrawal of market funding from a euro-zone government.
To address these issues, we propose a new euro-area institution, which we dub the European Monetary Fund (EMF).
I am skeptical that saving face is possible for a country facing bankruptcy.It is difficult to make the case for an EMF or any other "regional IMF" on broad-based "macroeconomic" grounds.
Any call on the EMF funds above this amount would be possible only if the country agrees to a tailor-made adjustment programme supervised jointly by the European Commission and the Eurogroup, and on condition that the EMF ranks ahead of all creditors".Again, I think that is more technocracy than we are allowed to conjure up.
Gros and Mayer complain that the IMF lacks such a mechanism, which is one reason why the EMF would be superior.
