Europe needs own IMF, says Eurogroup chief

[BRUSSELS] Europe needs its own European monetary fund that could replace the Washington-based IMF in any future bailouts in the eurozone, Eurogroup chairman Jeroen Dijsselbloem said on Thursday.

Mr Dijsselbloem, who is also Dutch finance minister, gave the European Parliament his strongest backing yet to the idea amid an ongoing row between the eurozone and IMF over the level of debt relief needed by Greece in its current bailout.

He said the Luxembourg-based European Stability Mechanism, the eurozone's bailout fund, should assume the responsibilities of the International Monetary Fund and that a report was in preparation to map out a way to do that.

"We can only successfully strengthen the monetary union if responsibility and solidarity are closely linked," Mr Dijsselbloem said.

"One way to work for that is to continue working at turning the ESM into a European monetary fund," he said.

Mr Dijsselbloem was also addressing parliament to personally apologise for remarks in March that implied that southern European countries blew money on "drinks and women" before the crisis.

The IMF comment was a major turnaround for Dijsselbloem who had until now insisted that creating a euro-IMF was a plan for the long-term.

The IMF has been an integral part of the eurozone bailouts since the start of the crisis in 2010, and is seen by powerful Germany as a guarantor of budgetary rigour.

"The ESM should be the lead in designing and negotiating and monitoring future programmes," Mr Dijsselbloem said.

The ESM could also "have a broader preventive mandate in line with the IMF, how the IMF does it now," he said.

In Greece's current bailout, talks between Athens, the IMF and the eurozone have dragged on for many months.

Despite pressure from Germany, the IMF so far has refused to participate in the 86-billion-euro (S$130.9 billion) loan program the eurozone agreed with Greece in mid-2015, the third since 2010, largely over the issue of the nation's debt sustainability.

IMF chief Christine Lagarde last week said the fund cannot participate in any loan program unless the debt level of the country is considered sustainable.

AFP