German Finance Minister Wolfgang Schaeuble again voiced support yesterday for the idea of a European monetary fund to help eurozone nations in crisis, but stressed that any aid would have to come with draconian penalties.
"Strict conditions and a prohibitive price tag must be attached so that aid is only drawn in the case of emergencies that present a threat to the financial stability of the whole euro area," Mr Schaeuble said.
"Monetary penalties could be imposed immediately and, once the aid and cooling-off period end, enforced against the member state without any recourse to reclaim the fine," he wrote in a guest editorial in the Financial Times.
The Finance Minister weighed in for a second time via the media in a debate over how to help heavily indebted eurozone states in view of the Greek debt crisis.
The eurozone treaties ruled out any such mechanism to rescue such countries, and European Union leaders fear that pressure brought on Greece by financial markets could spread to countries such as Italy, Portugal and Spain, placing the 16-nation eurozone in peril.
Although politicians have given the idea mostly tepid support, they stress that the process of shaping any new European Union institution would be long.
Some economists suggest that it could be modelled on the International Monetary Fund.
Mr Schauble, whose first expression of support gave the idea of an EMF greater credence because it came from the eurozone's biggest member, yesterday urged stiff penalties for aid seekers.
Any country seeking aid could first see EU funding for roads and other infrastructure cut off, their voting rights within the eurogroup of finance ministers suspended, and fines imposed.
If the country were unable to get its finances in order, it "should, as a last resort, exit the monetary union while being able to remain a member of the EU," Mr Schaeuble said.
He stressed aid should not be guaranteed in advance, that "it must, on principle, still be possible for a state to go bankrupt."
The European Central Bank should be associated with aid decisions and the Eurostat statistics office be given more power to inspect "all public accounts where suspicion of manipulation is substantiated," Mr Schaeuble said. Greece was granted eurozone admission after it submitted data widely believed to have been misrepresented, and Mr Schaeuble said that the voting rights of any country found to have "intentionally breached" EU law should be suspended for one year.
The German Finance Minister felt a fund would serve to reinforce market confidence and protect against the spread of financial crises.
His position is at odds however with that of two other prominent German financial figures, ECB board member Juergen Stark and central bank governor Axel Weber.
ECB president Jean-Claude Trichet said on Wednesday that the bank's governing council did not reject the idea of an EMF, which would influence how the bank works, but needed more detail on the proposal.
Commerzbank chief economist Joerg Kraemer said yesterday that the plan "supports our view that the eurozone is moving away from a monetary union as outlined in the Maastrict Treaty and towards a transfer union."
He agreed, however, that "the eurozone cannot afford another Greece."
German insistence on penalties is redolent of the line taken shortly before the euro was launched by its then Finance Minister Theo Waigel, the father of the existing Stability and Growth Pact.
Mr Waigel wanted clear cut-off lines and draconian fines on any country breaching the public finance rules, to avert a Greece-style crisis, but his proposal was radically diluted, largely under pressure from France, and the pact is now widely considered to be discredited.