https://www.esm.europa.eu/publications/safeguarding-euro/beyond-troika-esm-evolving-role During the crisis, the ESM grew to become one of Europe’s established institutions with economic and financial expertise, offering a reliable safety net to the now 19 members of the monetary union. As the euro moves into its next stage of development, the firewall has earned its place at the table...

https://www.esm.europa.eu/publications/safeguarding-euro/debt-relief-real-savings-greece Greece emerged from its programme in August 2018 with outstanding debt of €190.8 billion to the euro area rescue funds. As holders of 53.2% of Greek central government debt at the end of 2018[1], the EFSF and ESM are by far the country’s largest creditors. Since the latest debt relief measures...

https://www.esm.europa.eu/publications/safeguarding-euro/turning-corner-greece-third-programme Greek banks were shut and in need of cash when the government at last requested a third programme. On 10 July 2015, a Friday, the European Commission and the ECB responded favourably to the Greek request for an ESM loan, warning that ‘an uncontrolled collapse of the Greek banking system and of...

https://www.esm.europa.eu/publications/safeguarding-euro/moving-towards-grexit-cliff-edge Greek voters, bitter over the wage and pension cuts required by the troika, sought change via Syriza, the party led by the charismatic newcomer Alexis Tsipras. He became prime minister on 26 January 2015, with one month left in the second rescue programme and no prospect of an agreement on the final...

https://www.esm.europa.eu/publications/safeguarding-euro/safeguarding-capital-building-modern-strategic-investment-architecture The ESM’s ability to safeguard financial stability is anchored by the paid-in capital provided by its Members. Preserving this capital is therefore essential to fulfilment of the ESM’s mission. Initially the firewall was due to receive its capital gradually over five years. However, to show their...

https://www.esm.europa.eu/publications/safeguarding-euro/just-case-direct-bank-recapitalisation-tool The euro area established a direct channel to banks – a major advance for the monetary union – when the ESM’s toolbox was expanded to include a direct recapitalisation instrument (DRI). First conceived in 2012, the DRI was seen as a way to prevent further crisis escalation in the event of a heavily...

https://www.esm.europa.eu/publications/safeguarding-euro/ensuring-repayment-esm-early-warning-system Just as a private sector lender keeps tabs on the financial health of the borrower throughout the duration of the loan, the ESM needs to pay close attention to the balance sheets of the countries it assists. That is why governments mandated in the 2012 founding ESM Treaty that the fund ‘shall...

https://www.esm.europa.eu/publications/safeguarding-euro/clean-exit-portugal-wraps-its-programme The ESM proved its mettle in setting up the assistance programme for Cyprus, building on its success in providing bank-focused aid to Spain. One of the next challenges would be not just how to start a rescue programme, but how to help countries cement their recovery. In late 2013 and early 2014...

https://www.esm.europa.eu/publications/safeguarding-euro/crisis-cyprus-no-negotiating-power-no-credibility Cyprus was struggling with the broader ramifications of the crisis when the 2012 writedown of privately held Greek debt led to more than €4 billion[1] in losses for Cypriot banks, or in excess of 22% of GDP. With a banking sector that was then about six and a half times the size of the country’s...

https://www.esm.europa.eu/publications/safeguarding-euro/home-luxembourg-look-inside-esm-offices The ESM headquarters in Luxembourg’s Kirchberg district, the long-time home of private sector banks and public sector European institutions, has a major advantage over some older institutions: it was unencumbered by legacy systems – or even walls. This means its physical and information technology...

https://www.esm.europa.eu/publications/safeguarding-euro/capital-backing-key-top-esm-credit-rating When the ESM was launched in October 2012, it was important to secure the highest possible credit ratings, as the EFSF had done for its debut in 2010. The ESM would be starting anew, and AAA certification would tell investors that the issuer is a low-risk investment, enabling the ESM to borrow at...

https://www.esm.europa.eu/publications/safeguarding-euro/corporate-governance-esm-operating-manual Even before the ESM became a permanent fixture, the need for a governance framework for Europe’s newest international financial institution became pressing. Secretary General Anev Janse had worked hard to establish strong relations between the institution and its governors and directors. When...

https://www.esm.europa.eu/publications/safeguarding-euro/financial-milestone-esm-starts-operations Germany’s ratification of the treaty cleared the way for the launch of the ESM at the next scheduled meeting of Eurogroup finance ministers, on 8 October 2012 in Luxembourg. It was an opportune moment. Europe had put in place a robust crisis response plan. EFSF programmes for Ireland and Portugal...

https://www.esm.europa.eu/publications/safeguarding-euro/esm-trial-green-light-germany On 10 July 2012, a panel of judges in the distinctive red robes of Germany’s Federal Constitutional Court filed into a hearing that would ultimately decide whether or not the ESM could proceed. Resentment against Europe’s new firewall was bubbling into legal challenges across the euro area, with...

https://www.esm.europa.eu/publications/safeguarding-euro/spain-banks-esm-first-programme Spain’s crisis was a boom-bust cycle turned explosive by euro area contagion. In the 2000s, the Spanish economy was generally flourishing, its growth outpaced its European neighbours, and the budget recorded a solid surplus in many years. Most job seekers could find work, aided by a construction...

https://www.esm.europa.eu/publications/safeguarding-euro/breaking-doom-loop-towards-banking-union In the spring of 2012, Spain too was suffering from downgrades as it struggled to get its banking system under control. The banking crisis would soon force the Spanish government, under its Prime Minister Mariano Rajoy, to seek euro area aid. Yet Spain was far from alone in its concern about the...

https://www.esm.europa.eu/publications/safeguarding-euro/debt-sustainability-revising-metrics Europe’s first rescue programmes, from the bilateral loans for Greece to the EFSF-led packages for Ireland and Portugal, were designed to operate in part on the principle of dissuasion, as well as to encourage a smooth programme exit. Short-term lending at elevated rates was intended to spur aid...

https://www.esm.europa.eu/publications/safeguarding-euro/big-mistake-greece%E2%80%99s-second-rescue-stumbles With former ECB Vice President Papademos installed as interim prime minister in November 2011, Greece quickly began readying itself for a second rescue programme. First on the agenda was the proposed private sector debt exchange. An effort to put a deal together in late 2011 had collapsed, so...

https://www.esm.europa.eu/publications/safeguarding-euro/esm-takes-shape-something-fresh As the temporary fund prepared in 2012 to evolve into its permanent form, the ESM faced the same challenges as a start-up in the private sector: how to retain the nimble, entrepreneurial spirit of the early days while providing structure, and a career path and positive working environment for the...

https://www.esm.europa.eu/publications/safeguarding-euro/european-bazooka-trillion-question By December 2011, euro area leaders figured they had put together enough euros to reach the symbolic figure of $1 trillion in backstop resources. They hoped that amount would calm markets concerned that Spain or even Italy might represent Europe’s next weak link. Not only did they agree to reinforce...