'European IMF' to be proposed

Brussels - The European Commission will float proposals within 24 hours to create a "European IMF," a body that could rescue debt-hit countries like Greece, a commission official said on Monday.

Economic and Monetary Affairs Commissioner Olli Rehn will "inform" the full commission executive on Tuesday of ongoing "discussions" on the issue, his spokesperson said.

Plans to "reinforce economic coordination and country surveillance" across Europe will centre on the 16 nations that share the euro currency, which has come under pressure as a result of the Greek budget crisis.

The spokesperson, Amadeu Altafaj Tardio, said the commission was "ready to propose such a European instrument" and gave a tentative deadline of the end of June for full details on how and by whom it will be funded.

Rehn earlier told Monday's Financial Times Deutschland newspaper that financial aid, whether through loans or other guarantees, made available via such a body would be linked to "strict conditions."

In other words, budget cuts or economic reforms mandated by Brussels.

"Things are happening quickly," the commission spokesperson said, noting a "clear will on the part of actors in the eurozone to draw lessons from what happened (in Greece) and to take advantage of this opportunity."

The commission said the Frankfurt-based European Central Bank was involved in the planning but would not comment on German press reports to the effect Berlin wanted concrete "sanctions" for wayward members written into new arrangements.

According to the FT, these could include the loss of standard European funding, the temporary loss of voting rights in EU decision-making and even provisional exclusion from the eurozone.

The Greek deficit crisis has triggered intense debate over how the euro countries deal with localised internal problems, reviving arguments for bailout funding - rejected at the time by Germany - first advanced at the birth of the currency a decade ago.

Paradoxically, the 27-nation European Union can give emergency loans to non-euro members, as seen last year with Hungary, Latvia and Romania, with conditions attached, similar to practices by the International Monetary Fund.

Now German Finance Minister Wolfgang Schaeuble is in the forefront of moves to strengthen the toolkit for euro countries, telling the weekend Welt am Sonntag newspaper that "for the internal stability of the eurozone, we need an institution that has the experience and power of the IMF."

One of Schaeuble's spokespeople, Michael Offer, said that Berlin was working in tandem with France, "our most important partner," on proposals to be unveiled "shortly."

The idea was "triggered" by the Greek problems, but goes beyond the present crisis.

"A monetary union must be able to overcome crises itself," the spokesperson said. Seeking external aid would be "a sign of weakness."

Weighed down by a deficit more than four times the EU's limit, Greece has initiated austerity measures, including sweeping tax hikes and deep cuts in public spending.

The emergency action has sparked protests and nationwide strikes that have affected air and ground transport, as well as schools and hospitals.

It has also highlighted differences between the euro countries and those that have retained their own national currencies, giving them greater leeway in managing their finances as they can devalue their money if they so wish to help balance their books.

- AFP