Abstract: The European Monetary Fund will replace the European Financial Stability Facility. The EMF provides euro governments with financial means by selling Eurobonds in the capital markets and to bail-out packages for the PIIGS in EU. In European Mechanism for Financial Stability(EMFS), there are three possible mechanism:[i] International Monetary Fund (IMF) assistance but no conditionality [ii] Creation of the European Monetary Fund (EMF) [iii] Design of the European Mechanism for Financial Stability, that could include the EMF. The mechanism should refer to an implementation in 2 stages. The financing mechanism of the EMF ties in with the budgetary discipline as laid down in Art.126 TFEU. The EU treaty provides for three different procedures to amend the Treaties. Today the effective lending capacity of the EFSF is merely €250 billion, but it is scheduled to be increased to €440 billion. So EMF needs to primary and secondary markets for selling 5 year bonds. Even, total amount needed for a full, longer-term bail out of the entire periphery (Portugal, Ireland, Italy, Greece and Spain – or PIIGS) would be more than €2 trillion, or more than 20 percent of the euro zones GDP. So, EFM would introduce VAT bonds which could increase more revenues of EU for bail out packages. The funding of the EMF would have to be even larger, if additional and potentially also larger countries like Spain or Italy were to be rescued. Thus, while the idea of an orderly default procedure is well worth pondering, it appears highly questionable that an EMF could shoulder this task. A better alternative would be to introduce such a mechanism in the IMF.