'EMF' idea interesting, not a priority: France

Proposals for a European version of the International Monetary Fund to help troubled eurozone members such as Greece is an interesting idea but not a priority, French Economy Minister Christine Lagarde said yesterday.

"The proposal to set up a European Monetary Fund is an interesting approach which we should explore with a certain number of other states," Ms Lagarde said on the sidelines of a banking and insurance function.

At the same time, "it does not appear to me to be the absolute priority in the short-term," she added. The IMF is tasked with monitoring and advising member states on economic policy and can help them out with direct funding if they run into trouble.

With Greece struggling to put its public finances in order and its peers, especially Germany, reluctant to make a concrete commitment of aid for Athens, some have suggested an "EMF" is needed to help police the eurozone.

The idea has already sparked some sharp exchanges between officials and political leaders.

Ms Lagarde noted that "if it is simply meant to strengthen the European mechanisms already in place to govern (member state) finances, then it is not helpful, in my opinion, to stir up the polemic."

The eurozone set up in 1999 requires member states to keep their public or budget deficit below three per cent of GDP and their total debt below 60 per cent of GDP but several states - Greece, Spain, Portugal, Ireland - have seriously breached these limits as their economies have slumped.

Brussels agreed to ease the rules temporarily at the onset of the global financial crisis but in normal times they are supposed to be implemented strictly on pain of fines and other sanctions.