The IMF usually has maximal bargaining power at a country’s moment of crisis – it typically cares far less about whether the country makes it through than the country itself does, and hence can extract harsh conditions in return for aid. But – as we have seen with the Greek crisis – EU member states are far less able to simulate indifference when one of their own is in real trouble, both because member states are clubby, involved in iterated bargains etc, and because any real crisis is likely to be highly contagious (especially within the eurozone). In other words, the bargaining power of other EU member states (and of any purported EMF) is quite limited. If Greece really starts going down the tubes, Germany faces the unpalatable choice of either helping out or abandoning the system that it, more than any other member state, created. In short – any EMF, unlike the IMF, needs (a) to concentrate on preventing countries getting into trouble rather than dealing with them when they are already in trouble, and (b) deal with the fact that any country in trouble likely has significant clout in the architecture overseeing it.
Definitely we do not need an EMF with mandates and objectives similar to IMF.
My proposal is different and start also with a financial transaction tax as a first step of fiscal transfer.
http://mgiannini.blogspot.com/2010/03/stronger-case-of-eu-bonds-common.html
Without question the economics of information is Hayek’s most important innovation, and he was simply way out in front of everybody and anybody on it. While he did it partly inspired by and as an adjunct to the socialist calculation debate, its implications and usefulness go far beyond that, which is why his influence in this area is actually increasing rather than decreasing, in contrast to Friedman, whose influence is rapidly declining with each passing day.
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