Helsinki disapproves proposed EMF regulation

The Finnish government does not support the way of bringing reforms to the European Monitory Fund (EMF) as proposed by the European Commission.

Helsinki, however, has a favourable view towards the establishment of a European Monetary Fund, said an official press release.

The government also agrees with the idea of integrating the Fiscal Compact into the EU law, but does not agree with the Commission’s proposal for achieving this.

The government considers that the EU’s fiscal rules should first be reviewed in their entirety. The consistency and compatibility of the rules can be ascertained at the same time.

The directive proposal does not support this approach. Other member states, too, have taken a negative view of the Commission’s proposal.

The government on Thursday submitted the Union communications on the matter to parliament. A Union communication is used in EU affairs whenever there is a matter concerning an EU legislative proposal or other proposal that falls within parliament’s competence.

On December 6 last year, the EC submitted proposals for deepening Europe’s Economic and Monetary Union (EMU). The Commission’s proposals include transformation of the European Stability Mechanism (ESM) into a European Monetary Fund.

Established in 2012 by the euro area countries under an intergovernmental treaty, the ESM is an international financial institution with the tasks of promoting financial stability and sustainable public finances and restoration of conditions for growth in cases where a euro-area country is threatened by an economic crisis.

Under the Commission’s proposal, the legal status of the European Monetary Fund would correspond to that of an EU agency.

While the government takes a favourable view towards development of the ESM and its transformation into a European Monetary Fund, it is not in favour of approving the Commission’s proposal for a regulation. Instead, the ESM must be developed on the basis of the present intergovernmental treaty.

Finland can support the idea of establishing a common backstop to the Banking Union’s Single Resolution Fund within the ESM or the European Monetary Fund. The purpose of the backstop would be to secure resolution funding in cases where the resources in the Single Resolution Fund are insufficient.

The government maintains its view that the European Monetary Fund’s decisions on financial assistance and on the provision of the backstop should be taken unanimously. This would protect the budgetary authority of parliament.

The government considers that financial assistance can only be granted if the borrower’s debt sustainability is secured first – resorting to investor responsibility, if necessary.

The Commission also submitted proposals for a directive that would integrate the Fiscal Compact into the Union’s legal framework. The Fiscal Compact supplements the EU’s fiscal rules.

The government is in favour of integrating the Fiscal Compact into the EU law, but the Commission’s directive proposal is at odds with the Fiscal Compact.