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Proposal of New Euro Zone Fund Might Put Greece under Permanent Fiscal Supervision

eurogroupppp-thumb-largeThe creation of a new fund to shield the euro zone from financial shocks will be discussed at a Eurogroup meeting scheduled for Friday; the fund policies might put Greece under permanent fiscal supervision.
According to Reuters, the Slovak European Union presidency has prepared the note to be discussed by the 19 euro zone finance ministers and central bank governors who will meet in Bratislava on Friday.
According to the proposal, Reuters says, the fund could move money from EU countries that are prospering to those that are in fiscal trouble. At the same time, the fund could act as a cushion for external financial shocks. The Slovak proposal calls it “fiscal capacity”.
“The existence of a fiscal capacity would … decrease the pressure on the central bank to engage in non-conventional monetary policy,” the Slovak presidency paper said.
Only the countries that implement structural reforms recommended annually to each country by the European Commission and EU finance ministers could have access to the fund. The paper notes that euro zone governments routinely ignore those recommendations now.
The note further says that the rules should be strict and swiftly applied so that prolonged political discussions and negotiations are avoided. Countries that qualify for using the fund should specify how much money could be used for what purpose and how the money would be repaid.
Financing for the fund could come from annual contributions and countries with high primary surpluses would contribute more.
The establishment of such a fund might mean that Greece, with its long history of deficits, might be under permanent supervision. Also, under the present bailout program, it is unknown what the contribution of Greece would be to financing the fund, or if the country can access money from the fund.

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