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From ESM to EMF and Back: A Critical Analysis of the Euro Area Reform Proposals (Hannes Hofmeister)

A year ago, the European Commission published with great fanfare a set of proposals that would fundamentally reform the euro area. These proposals included, inter alia, the establishment of a European Monetary Fund. This new institution was intended to be on a par with the International Monetary Fund and conceived as the key pillar of the reform. A great leap forward in ending the euro crisis and creating financial stability was in the making – at least so it seemed. One year later, after much political infighting, the EU abandoned its great vision and apparently returned to Jean Monnet’s «petits pas» theory: Instead of creating a European Monetary Fund, the Member States decided merely to reform the already existing European Stability Mechanism (ESM). This article will critically analyse the reform proposals and will focus in particular upon the question – of whether or not – in the long term an integration of the ESM into the EU legal framework is desirable and legally possible.