What is the European Stability Mechanism (ESM)?
The ESM is a crisis mechanism set up to safeguard financial stability in the Euro Area. Its main features will build on the existing European Financial Stability Facility (EFSF).
The ESM will complement the new framework for reinforced economic surveillance in the EU. This new framework, which includes in particular a stronger focus on debt sustainability and more effective enforcement measures, focuses on prevention and will substantially reduce the probability of a crisis emerging in the future.
When will it be operational?
The ESM will become operational as of mid-2013 following the expiry of the existing EFSF.
An overall evaluation of the new mechanism will be performed by the Commission, in liaison with the ECB, in 2016.
The ESM will be able to provide assistance to Euro Area Member States in financial distress. Assistance will be conditional on the implementation of a strict economic and fiscal adjustment programme, in line with existing arrangements.
What form will private sector involvement take?
Private sector involvement will be decided on a case-by-case basis, fully in line with IMF usual practices. There will be no automatic solutions and no prior requirement. The exact form of the participation by private creditors will depend on the specific nature of the problem to be addressed and will be fully consistent with IMF practices.
© European Commission
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