EU Macro-Financial Assistance : A Critical Assessment

23-02-2012

This study analyses the ongoing experience of the Macro-Financial Assistance (MFA) instrument of the European Union since 2006, and reviews the Commission proposal for a new Framework Regulation to govern its future operations. This leads to conclusions under three headings: i/ The substantive results for operations since 2006 are mixed, most operations showing at best only marginal economic or political impacts. The MFA is secondary in size and conditions to IMF operations which it is supplementing, while the additional conditions specific to the MFA are modest in scope and impact. ii/ The proposed Framework Regulation would be an advance in the interests of greater speed of operations and transparency, but member states in the Council are apparently seeking to block this potential progress with burdensome procedures that would amount to micro-managing the Commission’s executive role. iii/ The present context is one of ominous macroecononomic prospects for the EU and its close neighbours as a result of the eurozone crisis, compounded for the South Mediterranean states by the economic consequences of the Arab Spring. While it is implausible that the MFA be massively expanded, this is not the time to dismantle it, and options for its possible improvement are discussed.

This study analyses the ongoing experience of the Macro-Financial Assistance (MFA) instrument of the European Union since 2006, and reviews the Commission proposal for a new Framework Regulation to govern its future operations. This leads to conclusions under three headings: i/ The substantive results for operations since 2006 are mixed, most operations showing at best only marginal economic or political impacts. The MFA is secondary in size and conditions to IMF operations which it is supplementing, while the additional conditions specific to the MFA are modest in scope and impact. ii/ The proposed Framework Regulation would be an advance in the interests of greater speed of operations and transparency, but member states in the Council are apparently seeking to block this potential progress with burdensome procedures that would amount to micro-managing the Commission’s executive role. iii/ The present context is one of ominous macroecononomic prospects for the EU and its close neighbours as a result of the eurozone crisis, compounded for the South Mediterranean states by the economic consequences of the Arab Spring. While it is implausible that the MFA be massively expanded, this is not the time to dismantle it, and options for its possible improvement are discussed.