EU considers own crisis fund

BRUSSELS:The European Union plans to create a European Monetary Fund to better coordinate the economies of the 16 countries that use the euro and prevent financial debacles such as the Greek debt crisis from undermining the credibility of Europe's single currency.

The European Commission said Monday it was negotiating details with eurozone governments and hopes to wrap up the talks by July 1.

EU officials stressed the aim was not to engineer a quick bailout of Greece "but to draw lessons" from the current finanicial turmoil. Greece's troubles follow years of overspending and shoddy statistics-keeping that understated the size of its deficits.

"The idea is that Greece must not happen again and we must reinforce economic policy coordination. That is a priority," said EU spokesman Amadeu Altafaj Tardio

"We are in discussion with the countries of the eurozone. This is about ways and means to be more effective in pre-empting (financial crises) and surveillance" of economic policies, he told reporters.

Altafaj Tardio neither give a timetable for the creation of European Monetary Fund, nor details of the current discussions.

The Geek debt crisis has bared a shortcoming of the EU's monetary union. While sound finances are needed to underpin the euro's stability, the rules limiting governmetn deficits have not been enough to keep some countries from running up large amounts of debt. Nor is there an oversight procedure to ensure sound policies are implemented.

In discussing a European Monetary Fund, EU officials did not discourage comparisons with the International Monetary Fund in Washington.

The Washington-based IMF tracks the economic health of its 186 member countries, warns them of economic risks and can provide loans and other help when they get into currency or financial crises.

Altafaj Tardio gave no details of how much money a future EMF could command or what its shareholders structure would look like based on their financial pledges to the fund.

In the Greek debt crisis, Germany and other euro nations have urged Greece not to go to the IMF for a bailout loan. Such a possibility is widely seen as embarrassing in eurozone capitals and damaging to the euro area's credibility.

While the Greek debt crisis has proven to be acute — Athens' 2009 budget gap was almost 13 percent, more than four times the ceiling set by the euro rules — other countries are also in trouble. Portugal and Spain also have excessive deficits.