“The past 10 years have brought a lot of changes to our world and the financial system that supports it, but one thing that hasn’t changed is our relationship between these institutions,” LuxSE CEO Robert Scharfe said at the start of the ceremony.
ESM was established in October 2012 as a permanent solution to the problem which arose and for which EFSF was initially temporarily set up in June 2010, to solve the backstop issue for euro countries which weren’t able to tap the markets any longer.
The two programmes have disbursed over €295bn to five countries, first to Ireland, then also to Portugal, Greece, Spain and Cyprus which, in turn, helped those countries to return to normal market access after successfully exiting the programmes.
ESM to play stronger role
ESM member countries amended the ESM treaty on 27 January and 8 February 2021, and in his keynote speech, ESM managing director Klaus Regling talked about some of the upcoming changes.
Among them, the ESM will “play stronger role in future economic adjustment programmes, and in collaboration with the European Commission will design, negotiate and monitor future assistance programmes,” Regling said, adding ESM’s precautionary credit lines should become “more effective and easier to use.”
Additionally, ESM will provide a backstop to the Single Resolution Fund.
The covid-19 pandemic has also provided a major change as well, leading ESM to create a pandemic crisis support, “a credit line available to help finance health-related expenditures,” Regling said. “If a country requests the facility, it will be able to draw ESM loans amounting to up to 2% of its GDP at zero or negative interest rates. It means that about half of euro-area countries can finance their health-related needs more cheaply via the ESM that by borrowing directly from the market.”
On Brexit & stepping down
2019 marked the listing of ESM’s first bond governed by Luxembourg law at a time, before the UK’s formal exit from the EU. Scharfe said, “I sincerely hope that we can continue to rely on strong ties, and hopefully the same applicable rules with the City of London, for the benefit of a continuous joint development of the international market.”
The CEO also took the opportunity to refer to his upcoming departure, which will see current deputy CEO Julie Becker take over the helm at LuxSE in April. She echoed Regling’s sentiments on turbulent times as a result of the health crisis, which has “stretched each and every nation to its limit”, but praised the programmes’ role and that she was looking forward to building on the established relationship with the ESM in her new role.