IMF's Dominique Strauss-Kahn wants fiscal and reform powers given to Europe
A federal Europe, with more sovereign power ceded to the centre, is the best defence against any future crisis, the head of the International Monetary Fund has declared.
Photo: Reuters
Warning that "the sovereign crisis is not over", Dominique Strauss-Kahn, the IMF managing director and a likely French presidential candidate, called on the European Union to move responsibility for fiscal discipline and structural reform to a central body that is free from the influences of member states.
The proposal from so powerful a figure will dismay Ireland and other peripheral euro-zone nations already fearful of a loss of sovereignty as the price of a bail-out. Ireland is expected to agree a rescue of up to €100bn (£85bn) within days, in the form of a low-cost loan to shore up the banks.
The scale of Ireland's problems was laid bare on Friday by Allied Irish Banks, which revealed that it has lost €13bn of customer deposits – mostly "institutional and corporate" – since the start of the year, 17pc of its entire deposit base.
Its reliance on funding from "monetary authorities" has risen to €27bn from a "high single-digit" billions at the end of June, a spokesman said. Allied now has just €11bn of acceptable collateral left to pledge to institutions like the European Central Bank.
Allied's numbers sent a fresh wave of panic through the markets, pushing Irish bond yields higher and erasing some of the euro's earlier gains.
Irish 10-year bond yields rose three basis points to 8.34pc and the euro was little changed against the dollar at $1.3652. George Papaconstantinou, Greece's finance minister, added the bleak warning: "Even if Ireland is helped, it cannot prevent the debt crisis from continuing."
Allied also abandoned plans to sell its UK arm due to the "challenging market conditions" and increased its planned capital raising this year from €5.4bn to €6.6bn.
Mr Strauss-Kahn's call to centralise power in Europe is significant because the IMF will contribute a large portion of the Irish rescue. In a speech in Frankfurt, he said: "The wheels of co-operation move too slowly. The centre must seize the initiative in all areas key to reaching the common destiny of the union, especially in financial, economic and social policy. Countries must be willing to cede more authority to the centre.
Referring to the crisis, he said: "The [eurozone] area's institutions were simply not up to the task – even setting up a temporary solution proved to be a drawn-out process. "One [solution] is to shift the main responsibility for enforcement of fiscal discipline and key structural reforms away from the Council. This would minimise the risk of narrow national interests interfering with effective implementation of the common rules."
In proposals that are likely to play into the hands of eurosceptics in the UK and elsewhere, Mr Strauss-Kahn recommended more tax harmonisation and a larger central budget for the euro area. He said that labour market reforms need to be centralised, saying: "It is time to create a level playing field for European workers, especially in the area of labour taxation, social benefits systems and portability, and employment protection legislation."
In as much as the IMF chief says we have a sovereign crisis, I believe a world sovereign will arise to address the crisis, this in fulfillment bible prophecy of Revelation13:5-10. I also believe this global leader will be complemented by a global seignior, an Old English term meaning top dog banker who takes a cut, as foretold in Revelation 13:11-17, and that he will implement unified regulation of banking globally, as well as a global currency system.
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