ESM: European bailout fundProfessor of the Official University Master's Degree in Integrated Logistics and International Trade , Erica Fellinger, from Bureau Veritas University Center, talks to us in this post about the ESM or European Stability Mechanism.
Today I am referring to the ESM, an acronym that stands for the term "European Stability Mechanism" , or, if we prefer in English, "European Stability Mechanism" , ESM.
Does the ESM sound familiar? What about the European Rescue Fund? Yes, it is the same issue and it is the intergovernmental financial institution based in Luxembourg, the successor to the European Financial Stability Facility .
The European Council decided to set it up in mid-2011 and the twitter data founding treaty was signed in February 2012 to safeguard the financial stability of the eurozone as a whole and of its Member States . The fund has a capital of 700 billion euros, of which 80 billion were initial direct contributions made by the signatory states.
As stated in Article 21 of the Treaty, in order to carry out its tasks, the ESM will be authorised to borrow funds from banks, financial institutions or other persons or entities on the capital market. And, in order to cover its operating and administrative costs, the ESM will be authorised to use part of the returns from its investment portfolio.
The ESM is intended for various functions, the most widespread of which is to grant loans to Member States to clean up their financial systems , without forgetting, of course, to establish strict conditions for the beneficiaries of financial aid. This was the case with countries such as Spain.
However, the ESM can also recapitalise financial institutions through loans to the governments of Member States , including those countries not in the programme.
This function was the one that opened the political debate. The question on the table was “why does the ESM not have the possibility of directly recapitalizing the banks?” The answer is being given by the European Union within the framework of the banking union, so that it achieved an agreement in principle, in mid-March 2014, to grant the ECB the role of sole supervisor.