German Finance Minister Wolfgang Schauble has suggested setting up a European monetary fund to enable the euro zone to tackle debt crises such as that seen in Greece without resorting to the IMF. European Union Monetary Affairs Commissioner Olli Rehn has welcomed the idea.

German Finance Minister Wolfgang Schauble has won support from E.U. Economic and Monetary Affairs Commissioner Olli Rehn for a proposal to set up a European monetary fund to tackle debt crises such as the one in Greece.

"We are working closely with Germany, France and the other E.U. member states on this issue," Rehn told the Financial Times Deutschland in an article published on Monday. "The Commission is prepared to propose such a European instrument that gets the support of the members of the euro zone." Any aid provided by the funds would need to be "combined with strict conditions," he said.

Greece has run up a budget deficit more than four times higher than the E.U.'s limit of 3 percent of GDP, sparking market fears that it could default on its debt and threaten Europe's 11-year-old monetary union. The country has announced major spending cuts and tax hikes to reduce its budget deficit. The crisis has caused the euro currency to depreciate by around 10 percent against the dollar since the end of last year.