What is the European Stability Mechanism (ESM)?
Current role: Provides financial support to Eurozone countries that have or are at risk of serious economic problems
Lending capacity: up to 500 billion euros
Legal Basis: An intergovernmental treaty signed by the governments of the Eurozone in February 2012
Why is ESM required?
In order to enhance the resilience of the Economic and Monetary Union through a more efficient and effective use of the economic and social mechanism:
- Strengthening the ability to solve banks
- Stronger preparedness for crises
What will change when the ESM treaty is amended?
ESM has been given improved tools and an enhanced mandate:
- A new security mechanism for the joint decision fund to support the bank’s decision
- Simplified access to precautionary credit lines for environmental management mechanisms to prevent small crises from developing من
- More tools to promote sustainable debt in member states
- Get more involved in crisis preparedness
- A stronger role in the design and monitoring of future support programmes
How will the reform take effect?
- Political Agreement in the Eurogroup (November 30, 2020)
- Signing of the ESM Treaty Amendment Agreement
- Ratification of all 19 eurozone member states in accordance with national procedures
- Revised ESM Treaty enters into force
Early implementation of the JRF security mechanism is scheduled for 2022.
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