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Reform of the European Stability Mechanism (ESM)

Reform of the European Stability Mechanism (ESM)

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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