The European Stability Mechanism (ESM) inaugurated
The European Stability Mechanism (ESM) was launched in the margins of a Eurogroup meeting on 8 October, when the ESM Board of Governors held its inaugural meeting. The ESM will be the cornerstone of the European firewall and an integral part of the strategy to ensure financial stability in the euro area.
"The start of the European Stability Mechanism marks an historic milestone in the shaping of the future of the European Monetary Union. The ESM itself will certainly be regarded as a reassuring presence within and outside the Monetary Union," said Jean-Claude Juncker, President of the Eurogroup and Chairman of the ESM Board of Governors.
The ESM is a one of the tools of the crisis resolution mechanism for the countries of the euro area. Its purpose is to provide stability support through a number of financial assistance instruments to ESM member states which are experiencing, or are threatened by, severe financing problems.
This mechanism will be globally the largest international financial institution with a strong capital base of €700 billion of which €80 billion will be paid in by early 2014, including about €33 billion by 12 October 2012.
As a permanent mechanism, the ESM will take over the tasks currently fulfilled by the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM). This was initially foreseen for July 2013, but with the accelerated entry into force, the ESM will now operate alongside the EFSF. All new programmes will, as a rule, be financed by the ESM.
The most important decisions will be taken by the ESM Board of Governors, i.e. the euro area's finance ministers. It will also have a Board of Directors, as well as a Managing Director responsible for the day-to-day business. The Board of Governors appointed Klaus Regling, the Chief Executive Officer of the EFSF, as Managing Director of the ESM.
The ESM Treaty entered into force on 27 September 2012. All 17 euro area member states had ratified by 3 October 2012.