The Commission’s proposal to establish a European Monetary Fund - a critical analysis

Abstract

On December 6, 2017, the European Commission published a set of proposals to reform the euro area. These proposals include, inter alia, the creation of a post of European Finance minister, a euro area budget-line and the establishment of a European Monetary Fund (EMF). The latter will be at the centre of this article. The Commission does not intend to set up the EMF anew from scratch. Rather, the new EMF is to be built on the well-established structure of the European Stability Mechanism (ESM). The new EMF will thus succeed to and replace the ESM, with the latter’s current financial and institutional structure essentially preserved. However, the new institution will also take on a number of additional functions, such as providing a financial backstop for the Single Resolution Fund (SRF), enhanced monitoring tasks and the responsibility to report regularly to the European Parliament. But will these changes make EMU more efficient, coherent and democratic? And has the EU the competence to establish such a mechanism at all? The objective of this article is to answer these complex questions.