BERLIN: The European Monetary Fund being planned to replace the eurozone bailout fund should be controlled by member states and independent of the European Commission, the fund’s head Klaus Regling said on Monday.

The Commission wants the European Stability Mechanism to become an EU institution governed by a separate treaty signed by eurozone countries. Regling said the ESM should be an intergoversnmental body controlled by eurozone member states.

“It would be good for the ESM to be included in the EU treaty,” Regling told the Ausburger Allgemeine Zeitung newspaper.

“However, the path proposed by the Commission is ambiguous. What I would like for the ESM is a role similar to the European Investment Bank. It is expressly mentioned in the EU Treaty but is relatively independent of the Commission and largely controlled by the member states,” he said.

Such arrangements for the ESM are only achievable through modifications to the EU treaty, which is unlikely to happen in coming years, said Regling.

The Commission last year unveiled a package of proposals on deeper economic integration of the 19 countries that share the euro, aimed at making the single currency area more resilient to crises. Those included turning the ESM into a full-blown European Monetary Fund.

The main task of the ESM now is to lend cash to governments that have been cut off from markets in exchange for reforms that put their economies back on track. It has helped Greece, Ireland, Portugal, Spain and Cyprus over the past few years.

In addition to providing loans to member states in financial trouble, the EMF would be a backstop for the eurozones lender-funded bank resolution fund, the Single Resolution Fund.

Published in Dawn, February 20th, 2018