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Not Under US Influence
The German Ministry of Finance published concrete plans last weekend for the establishment of a European Monetary Fund (EMF), patterned after the International Monetary Fund (IMF). It was the crisis in Greece that triggered this initiative. In Berlin, it is still being discussed whether - in case Athens' billions in budget cuts are insufficient to overcome the crisis - the Greek government should be financially aided or allowed to go into national bankruptcy.[1] The IMF is offering financial aid, and Berlin is doing everything possible to keep Athens from accepting IMF aid, because this would allow finance institutions in Washington, where the United States wields a lot of weight, to have a direct influence within the Eurozone. The German Ministry of Finance has therefore developed a concept for establishing an EMF.
European Economic Policy
The EMF concept is Berlin's reaction to French and Belgian proposals for promoting a better synchronization of economic and financial policies within the Eurozone, to avoid future crises such as in Greece. Paris is already in favor of a common EU economic policy. In early January, Paris had supported Spain's Prime Minister, José Luis Rodriguez Zapatero's demand that would have led to the establishment of an EU economic strategy. Germany had repeatedly refused this demand. Last week, Belgium's Prime Minister, Yves Leterme, spoke in favor of "establishing a common finance ministry or a European debt agency for the Eurozone."[2] Simultaneously, the idea of the creation of a European Monetary Fund has been discussed in Brussels and Paris since some time. While in Germany the idea was only being discussed in specialist circles four weeks ago, the French daily, Le Monde, published the fiery plea: "Let's Create a European Monetary Fund!"[3]
Speculators
In the meantime, Berlin is under growing pressure not just from Europe, to either agree to an IMF financial aid package for Greece or to the creation of an EMF. Monetary speculation aimed at the Euro and at Greece, whose source has been pinpointed particularly in US hedge funds, are a cause of concern in Germany that the Euro could sooner or later run into serious difficulties.[4] Therefore Berlin is seeking a means of creating structural access to financial aid for nations shaken by the crisis, to deprive speculators their prey. The EMF is one possibility. A spokesperson for the German Ministry of Finance had declared in mid-February that the EMF is "not suitable" for overcoming the crisis,[5] therefore, Finance Minister, Wolfgang Schäuble is tabling his own proposal.
Finance Dictatorship
According to his plan, the projected EMF will be allowed to provide financial aid, but with heavy strings attached. The indebted nations will, de facto, have their sovereignty in budgetary questions abrogated for a period of time. Financial aid should only be accorded, if no nation in the Euro group raises objections, which gives Germany a de facto veto right. In addition the Euro group must pledge themselves never to accept money from the IMF. There will be no guarantee of financial aid, so the prospect of a nation going bankrupt remains and exclusion from the Eurozone is possible. According to Berlin, the nations not abiding by the rules of the Stability and Growth Pact must receive much harder sanctions than before. For example a nation's right to vote can be rescinded - for up to a year - for a country that has violated the monetary rules. The country concerned would thereby de facto become subjugated to a foreign financial dictatorship.[6]
Hard to Swallow
Berlin's proposal of a future EMF reinforces restrictions laid down by the Stability and Growth Pact, which sets strict limits on government spending. This runs contrary to the plans particularly of France, which would have provided for a more open organization of the EU's economic policy. The British press therefore considers that the proposals of Berlin's Ministry of Finance should be "hard to swallow for France."[7] The French press writes that Berlin obviously believes that "with an EMF, a thoroughly Germanic budgetary stringency can, at long last, be imposed on its lax partners."[8]
Balkanization
The German Finance Minister wants, under all circumstances, to prevent Paris from watering down his proposals. Even though they publicly declare their complete opposition to his proposals, he can count on support from the majority of the members of his government coalition. For example, the finance expert Frank Schäffler (FDP), who only a few days ago suggested that Greece should sell some of its islands and have private companies help pay off its debts,[9] considers the proposal to establish an EMF to be "the wrong road to take." This would foster a Balkanization of the Euro.[10] Similar misgivings can be found among the Christian Democrats, according to the press. These comments are aimed at creating the impression in the German-European public opinion, that the German government has only a restricted margin of maneuver, facilitating the imposition of these rigorous proposals without too many changes. Just as the EMF is oriented on the IMF, further cutbacks and reductions can be expected in the EU's wage and welfare policy. IMF policies have often provoked protests and social upheaval the world over.
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