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"The start of the European Stability Mechanism marks an historic milestone in the shaping of the future of the European Monetary Union. The ESM itself will certainly be regarded as a reassuring presence within and outside the Monetary Union", said Jean-Claude Juncker, President of the Eurogroup and Chairman of the ESM Board of Governors.
The ESM is a one of the tools of the crisis resolution mechanism for the countries of the euro area. Its purpose is to provide stability support through a number of financial assistance instruments to ESM member states which are experiencing, or are threatened by severe financing problems.
This mechanism will be globally the largest international financial institution with a strong capital base of €700 billion, of which €80 billion will be paid-in by early 2014, including about €33 billion by 12 October, 2012.
As a permanent mechanism, the ESM will take over the tasks currently fulfilled by the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM). The EFSF was established in June 2010 for a period of three years and will stop functioning after July 2013, when the ESM initially was due to take over. With the accelerated entry into force, the ESM will now operate alongside the EFSF for nine months. In the transitional period, all new programmes will, as a rule, be financed by the ESM.
The most important decisions will be taken by the ESM board of governors, i.e. the euro area's finance ministers. It will also have a board of directors, as well as a managing director responsible for the day-to-day business. The board of governors appointed Klaus Regling, the chief executive officer of the EFSF, as managing director of the ESM.
The ESM Treaty entered into force on 27 September, 2012. All 17 euro area Member States had ratified by 3 October.
In a separate statement, Klaus Regling, Managing Director of the ESM said: “I welcome the inauguration of the ESM as a milestone in the process of creating a sustainable framework for financial stability in the euro area. With a robust and transparent capital structure and a variety of financial assistance instruments, the ESM stands ready to fulfil its mission and to provide assistance to Member States subject to appropriate conditionality. ESM staff, thanks to the experience gained by working for the EFSF, are fully prepared to take on the tasks assigned to it by the euro area Member States.”
Frequently Asked Questions on the ESM
European Stability Mechanism Treaty (ESM) (February 2012, full text)