Reform of the Treaty establishing the European Stability Mechanism (ESM)

Summary:

Information Guide concerning the reform of ESM Treaty, set in motion following a mandate provided by the European Council in December 2018.

Further information:

The revision of the Treaty establishing the European Stability Mechanism (ESM) was conducted in the framework of the work to complete the Banking Union and to further strengthen the Economic and Monetary Union (EMU). This reform included the introduction of a common backstop for the Single Resolution Fund (SRF) and the further development of the financial assistance instruments and the role of the ESM. The common backstop is in the form of a credit line from the ESM to replace the Direct Recapitalisation Instrument.

The European Council discussed the reform of the EMU on 14 December 2018, on the basis of a report by the Eurogroup. This included a term sheet on the ESM reform and the terms of reference of the common backstop to the SRF. The Eurogroup in June 2019 showed broad agreement over a draft revised ESM Treaty, reaching an agreement over the full package relating to the ESM reform in at a meeting in December 2019, which was endorsed by the European Council later in the month. The Eurogroup agreed on 30 November 2020 to sign the Amending Agreement to the ESM Treaty in January 2021 and proceed with the ratification process. The signing of the amending agreements to the Treaty on the European Stability Mechanism and the Single Resolution Fund Intergovernmental Agreement took place on 27 January 2021.

Official

Agreement amending the Treaty establishing the European Stability Mechanism https://www.consilium.europa.eu/media/48069/agreement-amending-the-treaty-establishing-the-european-stability-mechanism-27-january-2021_en.pdf

Agreement amending the Intergovernmental Agreement on the transfer and mutualisation of contributions to the Single Resolution Fund https://www.consilium.europa.eu/media/48068/agreement-amending-the-intergovernmental-agreement-on-the-transfer-and-mutualisation-of-contributions-to-the-single-resolution-fund-27-january-2021_en.pdf

EU ESM: ESM Reform https://www.esm.europa.eu/about-esm/esm-reform

Irish Government: Press Release, 02/11/2018: ESM Reform – shared views of the finance ministers from the Czech Republic, Denmark, Estonia, Finland, Ireland, Latvia, Lithuania, the Netherlands, Sweden and Slovakia https://www.gov.ie/en/press-release/394603-esm-reform-shared-views-finance-ministers-czech-republic/

Eurogroup: Press Release, 04/12/2018: Eurogroup report to Leaders on EMU deepening https://www.consilium.europa.eu/en/press/press-releases/2018/12/04/eurogroup-report-to-leaders-on-emu-deepening/

EU ESM: Press Release, 21/06/2019: Explainer on ESM reform and revisions to the ESM Treaty https://www.esm.europa.eu/press-releases/explainer-esm-reform-and-revisions-esm-treaty

EU ESM: ESM Treaty Reform - Explainer (December 2019) https://www.esm.europa.eu/about-esm/esm-treaty-reform-explainer

Eurogroup: Press Release, 30/11/2020: Statement of the Eurogroup in inclusive format on the ESM reform and the early introduction of the backstop to the Single Resolution Fund https://www.consilium.europa.eu/en/press/press-releases/2020/11/30/statement-of-the-eurogroup-in-inclusive-format-on-the-esm-reform-and-the-early-introduction-of-the-backstop-to-the-single-resolution-fund/#_ftnref1

Eurogroup: Statement by the Eurogroup President, Paschal Donohoe, on the signature of ESM Treaty and the Single Resolution Fund Amending Agreements (27 January 2021) https://www.consilium.europa.eu/en/press/press-releases/2021/01/27/statement-by-the-eurogroup-president-paschal-donohoe-on-the-signature-of-esm-treaty-and-the-single-resolution-fund-amending-agreements/

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News

Reuters, 30/11/2019: Italy's 5-star leader Di Maio says Rome must delay approval of ESM reform https://www.reuters.com/article/idUSKBN1Y40EM

EurActiv, 04/12/2019: Ministers set to advance Eurozone reform amid political turmoil in Italy and Germany https://www.euractiv.com/section/economy-jobs/news/ministers-set-to-advance-eurozone-reform-amid-political-turmoil-in-italy-and-germany/1407417/

Reuters, 05/12/2019: ESM reform done in principle, no roadmap for euro zone deposit insurance https://www.reuters.com/article/idUSL8N28F1X8

Deutsche Welle, 30/11/2020: Eurozone finance ministers agree on bailout fund reform https://p.dw.com/p/3m2wd

Politico, 30/11/2020: Eurozone fund upgraded as ministers break year-long stalemate https://www.politico.eu/article/eurozone-fund-upgraded-as-ministers-break-year-long-stalemate/

EurActiv, 01/12/2020: Eurozone agrees reform to eurozone bailout fund https://www.euractiv.com/section/economy-jobs/news/eurozone-agrees-reform-to-eurozone-bailout-fund/

EurActiv, 07/12/2020: Italy’s M5S party ‘doesn’t like ESM reform, but will approve it’ https://www.euractiv.com/section/politics/short_news/italys-m5s-party-doesnt-like-esm-reform-but-will-approve-it/

Reuters, 09/12/2020: Italian parliament gives PM Conte green light to back ESM reform https://www.reuters.com/article/idUSKBN28J1P6

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Commentary and Analysis

Bruegel: Blog, 13/12/2018: Does the Eurogroup’s reform of the ESM toolkit represent real progress? https://www.bruegel.org/2018/12/does-the-eurogroups-reform-of-the-esm-toolkit-represent-real-progress/

Bertelsmann Foundation: Policy Brief, April 2019: A missed opportunity – Five reasons why ESM reform will fail to deliver https://www.bertelsmann-stiftung.de/en/publications/publication/did/a-missed-opportunity-five-reasons-why-esm-reform-will-fail-to-deliver/

Oxford University: Business Law Blog, 10/12/2019: The Ridiculous Drama in Rome Over Proposals to Reform the ESM Treaty https://www.law.ox.ac.uk/business-law-blog/blog/2019/12/ridiculous-drama-rome-over-proposals-reform-esm-treaty

LSE: EUROPP Blog, 11/12/2019: The proposed reform of the European Stability Mechanism must be postponed https://blogs.lse.ac.uk/europpblog/2019/12/11/the-proposed-reform-of-the-european-stability-mechanism-must-be-postponed/

CEPS: Policy Insights, March 2020: Overcoming the gridlock in EMU decision-making https://www.ceps.eu/ceps-publications/overcoming-the-gridlock-in-emu-decision-making/

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