Abstract
AbstractIn December 2018, the Euro Summit endorsed the Term Sheet on the European Stability Mechanism (ESM) reform prepared by the Eurogroup. In this context, the Euro Summit did not acknowledge the proposal of the European Commission to transform the ESM into the European Monetary Fund (EMF), but simply gave the Eurogroup a mandate to draft the relevant amendments to the ESM Treaty and submit them to the European Council of June 2019. Nonetheless, the justifications for the incorporation of the ESM into the body of the European Treaties continue to be valid and may come back into play. In this respect, it is worth highlighting two flaws that have emerged in the proposed transformation of the ESM into the EMF. First, the ESM Treaty does not contain any rule about extinction and transfer of functions. Second, the Commission’s proposal did not clarify what status the EMF would have enjoyed in the EU legal framework.
Highlights
In December 2018, the Euro Summit endorsed the Term Sheet on the European Stability Mechanism (ESM) reform prepared by the Eurogroup
The Euro Summit did not acknowledge the proposal of the European Commission to transform the ESM into the European Monetary Fund (EMF), but gave the Eurogroup a mandate to draft the relevant amendments to the ESM Treaty and submit them to the European Council of June 2019
On December 14, 2018, the Euro Summit endorsed the Term Sheet on the European Stability Mechanism (ESM) reform formalized by the Eurogroup on December 4, 2018.1 The Term Sheet is based on four key points: (1) The ESM will provide financial assistance to the Single Resolution Fund (SRF) in the form of a revolving credit line; (2) recourse to the Precautionary Conditioned Credit Lines is possible if certain quantitative criteria are met; (3) ESM financial assistance is to be granted only to those countries whose debt is sustainable and the capacity for repayment indisputable; and (4) the ESM and the European Commission will cooperate within, and outside, the financial assistance programs
Summary
In December 2018, the Euro Summit endorsed the Term Sheet on the European Stability Mechanism (ESM) reform prepared by the Eurogroup. Any reference to the transformation of the ESM into the EMF was dropped out, the reasons for the incorporation of the ESM into the body of the European Treaties continue to be valid and may come back into play Against this background, the purpose of this Article is to illustrate the mechanisms of financial assistance to European countries, to delineate the proposal of the Commission, and to highlight the transformation of the ESM into the EMF, with specific reference to the forms and the methods and the results of this transformation. Following the coming into force of the monetary union, the Euro countries were no longer entitled to receive financial assistance under the scheme of the balance of payments facility (Article 143 TFEU). This lacuna derived from the deliberate choice of the drafters of the Maastricht Treaty to leave to the financial markets the task of imposing the fiscal discipline on borrowing states. In the long term, the assumption on which this choice was based turned out to be wrong
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