The euro zone needs a common finance minister and should consider issuing region-wide bonds to help pull it out of its economic crisis, said International Monetary Fund head Christine Lagarde.
“What is needed is a collective determination to advance towards a key stage in the development of the euro zone,” Lagarde told daily Liberation in an interview published on Saturday.
“We have to go beyond monetary union to bring together budgetary policies, also with supervisory instruments for the financial sector in the wider sense and with mechanisms for resolving banking crises. All this would be under a euro zone authority and not national central banks.”
Mindful of the deepening crisis, EU leaders are meeting at a June 28-29 summit where they are expected to draw up a roadmap to fiscal union, but Lagarde’s suggestions could raise eyebrows in Berlin.
Germany, which as Europe’s paymaster has shouldered the lion's share of the bloc’s bailouts, insists fiscal union must be implemented before it would even consider more radical changes such as common bonds that would expose it to further fallout from the crisis.
“My view is that within a short period, perhaps less than three months, it is necessary for the Europeans, particularly within the euro zone, to give strong indications on their collective willingness to reinforce their monetary union,” said Lagarde.
Speaking as Greeks prepared to vote in an election that will shape the euro zone’s future, Lagarde said it was important to raise the idea of a European treasury able to issue debt for the whole of the euro zone.
“This can’t be done overnight but it is important to assert this collective principle,” she said.
Differences between the euro zone’s biggest economies Germany and France - notably over joint euro zone bond issuance - have fuelled tensions ahead of the Greek ballot.
Central banks have indicated they are prepared to intervene if there is turmoil on markets following the vote, and the euro zone crisis will dominate talks between the world's top economies in Mexico next week.