The reform of the European Stability Mechanism

Abstract

A little over a year ago, the leaders of the countries of the euro area formally pledged to reform the European Stability Mechanism (the ‘ESM’). At the Euro Summit of 14 December 2018, the Heads of State or Government of the euro area Member States endorsed the ‘Term Sheet on the reform of the European Stability Mechanism’, including the anticipated changes to its founding treaty. In December 2019, both the Eurogroup in inclusive format and the subsequent Euro Summit reached an agreement in principle on this reform package, subject to the conclusion of national procedures. The anticipated reform of the ESM follows seven years of ESM financial assistance programmes, during which the ESM, together with its predecessor the European Financial Stability Facility (EFSF), provided almost EUR 300 billion in financial assistance to five euro area Member States. As of the beginning of 2020, all beneficiary countries have successfully exited their programmes and some have already started early repayment to the EFSF/ESM and other creditors, such as the International Monetary Fund (IMF). Key points