However the social cost of these adjustments is often very heavy

Advice tributary, in recent weeks, given the case of the Greece to the IMF. The Greece itself used this argument to convince its European him partners grant aid that it believes necessary to carry out its adjustment programme. Makers of the euro area are opposed to such a remedy which would mean their inability to handle difficult situations in the eyes of the rest of the world. Force is, however, to agree, in light of this crisis, that this inability is real and that the governance of the euro area has serious gaps.

In these circumstances should rely on the IMF to extinguish the fire looming in Greece Or should it try to fill the gaps in our economic governance by creating, or at least in drafting, the instruments that make it default

The primary deficiency of the Greek Government is currently 7.7 of GDP. Added the payment of interest on the debt for less than 5, but can be expected that the cost increase as refinancing of existing debt on account of the risk premium required by the markets. In these conditions, the Greece can be difficult to clean up its financial situation and to decrease the risk premium without access to financial resources at low cost. Fiscal and budgetary measures decided last week are a courageous step. The social cost is high. But, save in circumstances or exceptional financial facilities, they are not enough to correct the drift of the debt and reduce the cost of its financing at a reasonable level.

The international monetary fund can solve this problem In fact the evidence on multiple occasions, although in this case, important instruments are missing in its range, the devaluation and monetary policy. Loans granted at the rate without risk of the market and disbursed by tranches conditionally to obtain precise results in budgetary matters usually lead to an easing of the financial markets and progressive sanitation of the economy. However, the social cost of these adjustments is often very heavy.

Without fiscal policy centrally and taking into account the various constraints listed in the Treaty of Maastricht, Europe can only provide a partial substitute for this strategy. Practically, European (via EcoFin) pressure for the adoption of a credible policy adjustments resulted in the issuance of a loan made to a large extent by European financial institutions. This concatenation is equivalent to the funding and the conditionality of the Fund in a certain way. One major difference, however, which is funding through the market and thus imposes additional costs likely to weaken and even to paralyse the adjustment programme. What happens if the Greece of new difficulties and uncertainty recurs The loans without the risk of the market would be much preferable.

The "no lease out" clause prevents a Government from the European Union to bail out another, except in exceptional circumstances. Is it so impossible to imagine a European replica of the IMF action A proposal is circulated since a few days to create a "European Monetary Fund", with financial to intervene in a Member State in crisis, authorized to exercise the conditionality loans and implementation of the necessary adjustment policies, and with resources from the European Executive the same independence as the ECB. It is obviously difficult to create such an institution in the emergency. But the creation of an ad hoc Committee that would use these basic principles to facilitate the resolution of the Greek crisis and constitute a sort of draft of a future GEF could provide an output to the current crisis while showing the willingness of the euro area to reform its governance.

The alternative to a solution of this type is either the use of an external institution in the euro area, thus making the evidence of the lack of autonomy, or term, a lease out"which will not fail to encourage moral hazard and will push the problem to the next crisis.