Analysis Group Affiliate Jean-Pierre Landau Publishes Op-Ed on Monetary Funds in the Eurozone
December 12, 2017
In an op-ed published by The Financial Times, Analysis Group affiliated expert Jean-Pierre Landau supports a recent proposal by the German finance minister for a European Monetary Fund (EMF). In "Europe must create its own 'big bazooka' monetary fund," Dr. Landau contends that the EU needs this type of fund to shore up its resilience to market fluctuations and capacity to absorb economic shocks. Dr. Landau, a professor in the Department of Economics at Sciences Po, suggests that the European Stability Mechanism, the Eurozone bailout fund created during the 2011-2012 European economic crisis, could serve as an EMF if three significant changes were made.
Dr. Landau's proposed changes to the European Stability Mechanism would be to provide direct access to European Central Bank financing; determine what degree of fiscal austerity should be imposed on countries receiving support; and adjust current governance rules to allow decisions by a qualified majority, with "super majorities" required for very important matters. Currently, such decisions must be unanimous and may require parliamentary approval, thereby slowing down the process significantly, a particular concern in times of crisis. While recognizing that such a measure may conflict with the EU's founding treaties, Dr. Landau maintains that a good crisis management tool is an essential complement to a developed capital market union.