Governor of Bank of Portugal calls for creation of European Monetary Fund

After Portugal’s debt to the International Monetary Fund leapt €230 million with the fall of the euro against the dollar, Portugal’s Governor of the Bank of Portugal Carlos Costa has added his voice to calls for the creation of a European Monetary Fund.

Speaking at a financial conference in Lisbon today, Costa said the EU had “had too many assaults for cardiac capacity” and needed an institution “strong enough and with a mandate to resolve imbalances”.

Under attack from many quarters for the way he has so far handled ‘imbalances’ caused by the BES debacle, Costa said: “If a member state has adopted unsustainable policies or if there is a common shock, with asymmetrical effects (like the shock of oil in Europe), the (Euro)group cannot say “that’s your bad luck”, it has to show solidarity, even if it is a contractualised solidarity”.

The institution with the mandate to deal with this kind of crisis should “not be dependent on the approval of national parliaments”, he said, adding: “When one runs to European capitals asking for money, the problems continue to grow.”
The idea for an EMF was first mooted by Brussels-based think-tank Breugel and has since been supported by President of the Republic Cavaco Silva and Portugal’s Prime Minister Pedro Passos Coelho.

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