Bloomberg: Lagarde urges rainy-day fund for euro area to aid against shocks

26 March 2018

IMF Managing Director Christine Lagarde urged Europe to pursue further integration, including on spending, saying a closer union of euro-area countries would help counter rising populism and protectionism globally.

“A more unified euro area can be a compass to prosperity for the region and a beacon of hope to the world,” Lagarde said in a speech Monday in Berlin.

The IMF chief said the euro zone has made progress on a capital-markets and banking union, two areas in which the fund is calling for greater integration. But she also encouraged the currency union’s members to push toward setting up a “central fiscal capacity” that would establish a “rainy-day fund” that members finance through annual contributions.

With the U.K. leaving the European Union, Lagarde’s proposal comes as Germany, France and other members debate how to strengthen the 19-country euro area. While the notion of a central fiscal authority is “politically difficult,” monetary policy did too much of the “heavy lifting” during the last financial crisis and budget austerity worsened the problem, Lagarde said. [...]

Full article on Bloomberg

IMF note: A Central Fiscal Stabilization Capacity for the Euro Area


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