IMF chief sees merit in European Monetary Fund plan

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International Monetary Fund chief Christine Lagarde has given her support to plans to convert the euro zone’s bailout fund into a European Monetary Fund.

“Why not?” Lagarde answered in in an interview with Swiss newspaper Tages-Anzeiger when asked about suggestions from the European Commission to transform the role of the government-controlled European Stability Mechanism (ESM) into a full-blown European Monetary Fund.

“The crisis the euro zone went through showed that it needs a crisis management system that is independent, able to act quickly and that works according to strict rules," Lagarde said. "What that mechanism is called is secondary. If one wants to call it European Monetary Fund, then please.”

The fund would be under parliamentary control and anchored in European Union law, which would also become a backstop for the euro zone’s bank resolution fund.

The plan is backed by countries including France and Germany.

In the interview published on Saturday, Lagarde also brushed aside the suggestion that the IMF’s role was being usurped in a region where it has been involved in bailing out Portugal, Ireland, Cyprus and Greece in recent years - often in exchange for oversight and painful reforms.

“We do not serve a region but 189 countries. That also includes euro zone countries. And if together they decide that other crisis mechanisms like the ESM are involved, that is in order,” she was quoted as saying.

Source(s): Reuters