A European Monetary Fund : completing Europe’s Economic and Monetary Union : the Commission’s contribution to the leaders’ agenda.
Date: 2018-01-22
Institutions: Directorate-General for Economic and Financial Affairs
Subjects: Economic and Monetary Union, European Monetary Fund, economic policy, euro area

COMPLETING EUROPE’S 
           ECONOMIC AND MONETARY UNION
The Commission’s Contribution to the Leaders’ Agenda
#FutureofEurope #EURoad2Sibiu

A EUROPEAN MONETARY FUND

“The  euro  area  is  more  resilient  now  than  in  past  years.  We  now  have 
the  European  Stability  Mechanism  (ESM).  I  believe  the  ESM  should  now 
progressively  graduate  into  a  European  Monetary  Fund  which,  however, 
must be firmly anchored in the European Union’s rules and competences.”

European Commission President Jean-Claude Juncker, State of the Union Address, 13 September 2017

As announced in the Five Presidents’ Report of June 2015 and President Juncker’s 2017 State of the Union Address, 
the Commission proposes to build on the structure of the European Stability Mechanism to establish a European Monetary 
Fund anchored within the EU’s legal framework. Under this proposal, the European Monetary Fund will be set up as a unique 
legal entity under Union law.

Article 352 of the Treaty on the Functioning of the European Union¹
The Commission is proposing a Council Regulation, which is subject to the consent of the European Parliament, 
under Article 352 of the Treaty on the Functioning of the EU. Article 352 allows for the integration of the European 
Stability Mechanism into the Union framework, as this action is necessary for the financial stability of the euro 
area. It also foresees a specific role for national Parliaments.

Features of the new European Monetary Fund

▶  The European Monetary Fund will succeed the European Stability Mechanism leaving its current financial and institutional

structures essentially preserved.

▶  In recent years, the European Stability Mechanism has proven decisive in helping to preserve the financial stability of the
euro area by providing additional financial support to euro area Member States in distress. The European Monetary Fund
will continue to provide financial stability support to Member States in need. The financial firepower available to the
European Monetary Fund to react to crises will be identical, with an overall lending capacity of €500 billion.

▶  The European Monetary Fund will, as a last resort, provide the common backstop to the Single Resolution Fund as
part of the Banking Union. This would instil confidence in the banking system by underpinning the credibility  of actions
taken by the Single Resolution Board, thereby reducing the likelihood  of a situation in which a backstop would need to be
called on in the first place. The creation of such a backstop has already been agreed in principle, but needs to be made
operational. Any potential deployment of the backstop would be fiscally neutral over time since any funds used would be
recovered from the banking sectors in the Member States participating in the Banking Union.

1For further details, see the factsheet: The role of the ‘Flexibility Clause’: Article 352

▶  Faster decision-making is foreseen in specific urgent situations. Decisions on stability support, disbursements and the
deployment of the backstop could be taken by a reinforced qualified majority, in which 85% of the votes of the Board of
Governors are required to proceed.

▶  The European Monetary Fund will play a more direct role in the management of financial assistance programmes,

alongside the European Commission.

▶  Over time, the European Monetary Fund could develop new financial instruments to supplement or support other
EU financial instruments and programmes, for instance in support of a possible stabilisation function in the future.

▶  The establishment of the European Monetary Fund within the Union framework will strengthen efficiency and accountability

at EU level, while fully respecting the role of national Parliaments.

▶  The Council and the Commission will retain their competences and responsibilities in terms of economic and fiscal

surveillance and policy coordination, as set out in the EU Treaties.

Next steps

6 December 2017 
package

Euro Summit
15 December 2017

European Council 
28/29 June 2018

European Council
21/22 March 2019

Sibiu meeting
9 May 2019

Objective: By mid-2019, European Parliament and Council adopt proposal establishing European Monetary Fund under Union law.

2025

Print   ISBN 978-92-79-76259-8  doi:10.2765/35083    KC-06-17-326-EN-C
PDF    ISBN 978-92-79-76280-2  doi:10.2765/145856  KC-06-17-326-EN-N