Euro area integration :
The IMF pays considerable attention to progress in fostering integration within the euro area to ensure the effective operation of the monetary union. The first-ever EU wide Financial Sector Assessment Program (FSAP), in March 2013, argued for a Single Supervisory Mechanism (SSM). In addition, the IMF published papers making the case for a Banking Union to strengthen the EU financial oversight and sever bank-sovereign linkages; a Fiscal Union to address gaps in the euro area’s architecture; and a more effective Economic Governance framework to better incentivize structural reforms.
- Providing financing :
Since the start of the global financial crisis, a number of emerging and advanced European countries have requested financial support from the IMF to help them overcome their fiscal and external imbalances. Access to IMF resources for Europe was provided through Stand-By Arrangements(SBA), the Flexible Credit Line (FCL), the Precautionary and Liquidity Line (PLL), and the Extended Fund Facility (EFF)
Most of the first wave of IMF-supported programs in 2008-09 was for countries in emerging Europe. The IMF also provided financing to Iceland when its banking system collapsed in late 2008. Starting in 2010, credit was also provided to euro area members – Greece, Ireland, Portugal and Cyprus. Credit outstanding to these members peaked in July 2014 at SDR 66.3 billion, but has declined to about SDR 29.7 billion as of September 16, 2016, due in part to early repayments by Portugal and Ireland
As of September 16, 2016, the IMF had active arrangements with 6 emerging market countries in Europe (see table) with commitments totaling about EUR 33.9 billion or $38 billion. Total credit outstanding to European members was around EUR 49.4 billion or around US$ 55.4 billion.
- EXAMPLE OF IMF’S INTERVENTION IN EUROPE: EURO CRISIS :
Assessing individual countries and the euro area :
The IMF provides economic analysis and policy advice as part of its standard surveillance process for individual advanced and emerging European economies that culminates in regular (usually annual) consultations with individual member countries and, if relevant, EU institutions such as the ECB and EC. The bilateral surveillance staff reports for these consultations include assessments of the economic outlook, and economic and financial stability.
In addition to its policy discussions with the 19 individual members of the euro area, IMF staff also holds consultations annually for the euro area as a whole, similar to those held for other currency unions. Here, IMF staff exchange views with counterparts from the ECB, the EC and other European institutions in a number of areas, including monetary and exchange rate policies and regional fiscal policies, financial sector supervision and stability, trade and cross-border capital flows, as well as structural policies. The final staff report includes an overall assessment of the economic outlook, external and fiscal position, and financial stability of the euro area as a whole. As part of the euro area consultation, the IMF’s views on the economic outlook and policies of the euro area are presented to the Eurogroup, comprising the 19 finance ministers of the euro area.