Sean O'Grady: Could a European Monetary Fund work?

A European Monetary Fund? Why not? It would do all the things that the IMF can do to rescue a stricken economy, but it keeps it in the family, the European family that is. This has the great political advantage of keeping the US (which retains a big role in the Washington-based IMF) out of EU affairs. This, in case you hadn't guessed, is a particular concern of the French, who cannot bear the idea that Greece, or anyone else, should become a Trojan horse (to borrow an apt classical metaphor) for Anglo-Saxon orthodoxies. Too humiliating.

The reason the Germans don't mind it too much, apparently, is because it should merely formalise the current strictures being placed on Greece to repair its budget deficit; and make the current chaotic process of implicit bargaining for bailouts in return for austerity budgets much more orderly, and might bolster confidence. The downside, again political, is that the EMF, of necessity German-dominated, might revive the ugly rows over German reparations for the Second World War and, contrary-wise, cheeky demands from Berlin for the Greeks to sell off their uninhabited islands. That German magazine with a photoshopped Venus de Milo giving the rest of Europe the finger has sparked an awful lot of resentment. That is why some sections of German official opinion actually favour the IMF as a more neutral force to impose fiscal discipline on the Greeks. The most likely outcome would be a "hybrid solution" – European Union assistance with the IMF in the lead. The IMF is offering technical help to the Greek finance ministry.

At any rate a European Monetary Fund will take many months to establish, by which time the euro crisis ought to be resolved, one way or another. For the future the EMF might eventually evolve into the sort of European economic government that President Sarkozy keeps calling for.