Government in favour of a European Monetary Fund but not the proposed method of establishment
The Finnish Government takes a favourable view towards the establishment of a European Monetary Fund, but does not support the way in which the European Commission proposes to implement this reform. The Government also agrees with the idea of integrating the Fiscal Compact into EU law, but does not agree with the Commission’s proposal for achieving this.
On 6 December 2017, the European Commission submitted proposals for deepening Europe’s Economic and Monetary Union (EMU). The Commission’s proposals include the transformation of the European Stability Mechanism (ESM) into a European Monetary Fund.
Established in 2012 by the euro area countries under an intergovernmental treaty, the ESM is an international financial institution with the task of promoting financial stability, sustainable public finances and the restoration of conditions for growth in cases where a euro area country is threatened by an economic crisis.
Under the Commission’s proposal, the legal status of the European Monetary Fund would correspond to that of an EU agency.
Investor responsibility should be developed further
While the Government takes a favourable view towards development of the ESM and its transformation into a European Monetary Fund, it is not in favour of approving the Commission’s proposal for a regulation. Instead, the ESM must be developed on the basis of the present intergovernmental treaty.
Finland can support the idea of establishing a common backstop to the Banking Union’s Single Resolution Fund within the ESM or European Monetary Fund. The purpose of the backstop would be to secure resolution funding in cases where the resources in the Single Resolution Fund are insufficient.
The Government maintains its view that the European Monetary Fund’s decisions on financial assistance and on the provision of the backstop should be taken unanimously. This would protect the budgetary authority of Parliament.
The Government considers that financial assistance can only be granted if the borrower's debt sustainability is first secured – resorting to investor responsibility if necessary.
Fiscal rules should be reviewed as a whole
The Commission also submitted proposals for a directive that would integrate the Fiscal Compact into the Union legal framework. The Fiscal Compact supplements the EU’s fiscal rules.
The Government is in favour of integrating the Fiscal Compact into EU law, but the Commission’s directive proposal is at odds with the Fiscal Compact.
The Government considers that the EU’s fiscal rules should first be reviewed in their entirety. The consistency and compatibility of the rules can be ascertained at the same time. The directive proposal does not support this approach. Other Member States, too, have taken a negative view of the Commission’s proposal.
The Government submitted Union communications to Parliament on the matter on Thursday 15 February. A Union communication is used in EU affairs whenever there is a matter concerning an EU legislative proposal or other proposal that falls within Parliament’s competence. The Government’s Union communications are published under Decisions.
European Commission press release on deepening Europe's Economic and Monetary Union (6 December)
Government takes view that risk reduction essential for completion of EU Banking Union (News item 10 November)
Seppo Tanninen, Senior Counsellor (European Monetary Fund), tel. +358 2955 30224, seppo.tanninen(at)vm.fi
Niko Ijäs, Senior Ministerial Adviser (Fiscal Compact), tel. +358 2955 30170, niko.ijas(at)vm.fi