European Monetary Fund in the offing

“Milestone deal in prospect to create European Monetary Fund,” headlines today’s Les Echos. The French business daily reveals some of the technical details of the Stabilisation Fund, which is to be officially established on 7 June in Luxembourg by the eurozone finance ministers. “Negotiations redoubled in intensity last week, especially between Paris and Berlin”, culminating in a deal on the “intervention mechanisms of the financial stabilisation fund, which will borrow money on the market for the rescue package”. That package is to come to €750 billion, adds the paper: “250 billion of which in loans from the International Monetary Fund (IMF), 60 billion in loans from the European Commission and 440 billion in guarantees from eurozone countries”.

“The loans will be guaranteed by all 16 eurozone countries in the hopes of procuring an AAA rating for the fund.” The states will be at the controls, since “disbursements are to be decided at the level of the Eurogroup. So the European Commission, which could lend €60 billion in supplementary aid, will be relegated to the role of a mere spectator.”