Agreement on the European Stability Mechanism
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© European Union, 2012
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On 23 January, intergovernmental ministerial meetings were held on the new European Stability Mechanism (ESM) - producing a deal on the treaty text - and on the draft fiscal compact treaty. Earlier the same day, eurozone finance ministers took stock of the situation in Greece.
European Stability Mechanism
At a ministerial meeting of the 27 member states, chaired by Jean-Claude Juncker, President of the Eurogroup, agreement was reached on the treaty establishing the European Stability Mechanism (ESM).
Mr Juncker explained that the ESM would be able to use the new instruments that had been put in place for theEFSF, i.e. primary market purchases, secondary market interventions, recapitalisations of financial institutions and precautionary programmes.
"In case of emergency, we will be able to take decisions by qualified majority instead of mutual agreement, so that the ESM could always very swiftly come into action," he said.
The adequacy of the ESM lending ceiling will be reviewed regularly. The current joint EFSF/ESM lending capacity ceiling, 500 billion euros, will be reassessed by the heads of state or government in early March.
Transitional arrangements between the EFSF and the ESM will ensure uninterrupted financing of ongoing programmes as needed.
The ESM treaty will be signed in February, followed by ratification by the member states. It is to enter into force in July 2012, a year earlier than originally planned.
Negotiation of a fiscal compact
A meeting attended by the 27 ministers, and several members of the European Parliament who had taken part in the preparatory work, discussed a draft text for a new intergovernmental treaty to help ensure fiscal sustainability in the eurozone.
"The text as it stands today is a good basis for the discussions of the heads of state or government next Monday," said Jean-Claude Juncker.
The decision to establish such a treaty was taken at the European summit in December. The leaders are expected to agree on the treaty at the end of January and sign it by the beginning of March. The objective is to incorporate its provisions into the treaties of the Union as soon as possible.
Greece: talks with private creditors continue
The Eurogroup, the meeting of eurozone finance ministers, reviewed the progress of talks between the Greek government and the representatives of private bondholders on private sector involvement (PSI) in the restructuring of the Greek debt.
Chairman Juncker stated: "We welcomed the increased convergence and asked the Greek government to reach in the next few days a common understanding on the main terms and conditions of the PSI offer while respecting the main parameters and objectives set by the euro summit on 26 October."
Last week the Troika (the European Commission, the European Central Bank and the International Monetary Fund) started negotiations on a second adjustment programme to ensure the sustainability of the Greek debt. Commissioner Olli Rehn said that, as a prior action, Athens would have to accelerate implementation of structural reforms to strengthen its economy and growth. He expects to see results as to the second programme in the coming weeks.
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