Discussions have started on a type of rainy day fund that could help the eurozone address shocks such as the Greek debt crisis in the future, the head of the eurozone rescue fund, the European Stability Mechanism, said.
In comments made at London’s Chatham House think tank on Tuesday and published on Wednesday, ESM chief Klaus Regling said that a mechanism to counter “asymmetric shocks” was “an important gap in the euro area’s fiscal tools.” “A discussion about a limited fiscal capacity that would fulfill this function has begun,” Regling said. “The tool can be designed without debt mutualization, and without permanent transfers between countries,” he added. “In this context we could look at examples that exist in the US, for instance rainy day funds, or a complementary unemployment scheme.”
Figures of around 100-200 billion euros have been suggested privately by eurozone officials as a starting size for any such fund. In the longer run Regling said the eurozone could also develop a “European safe asset,” but that “it would require some debt mutualization.”
Debt sharing is currently not supported by the bloc’s main members such as Germany. It “cannot happen unless there is a lot more confidence that all euro area countries comply with the rules they have agreed to,” Regling said. [Reuters]