Teresa Czerwińska and Pierre Gramegna, respectively the finance ministers of Poland and Luxembourg, are seen during the Eurogroup meeting of EU finance ministers in Brussels, 3 December 2018. Photo credit: European Council
The European Stability Mechanism will gain new powers to support euro area governments under a deal agreed by EU finance ministers early Tuesday.
The ESM, based in Kirchberg, is the bailout agency for euro zone governments. Under the agreement reached on 4 December, the ESM will be able to intervene earlier to prevent banking collapses and aid solvent governments facing temporary problems raising money in the capital markets.
Mário Centeno, president of the Eurogroup, stated:
“We have agreed to enhance the role of the ESM to further strengthen the crisis prevention and resolution capabilities of the euro area. We will also increase the effectiveness of ESM precautionary instruments. At the same time, we reaffirmed that ESM support is a last resort and that we need to ensure an appropriate level of conditionality.”
In addition, the ESM will now share some responsibility with the European Commission on checking member state budgets, a role that had previously been handled solely by the commission.
“Ministers very much welcome the agreement reached between the ESM and the [European] Commission, which will improve cooperation within and outside financial assistance programmes,” said Centeno.
EU ministers also agreed to continue discussions on Europe-wide public budgets and unemployment schemes.
According to the Financial Times, the deal was struck: “after all-night talks in Brussels that pitted French-led reform ambitions against the reluctance of northern European capitals to share more financial risk.”