European Stability Mechanism: Ten years of building a firewall against the euro crisis-Zimo News


That was ten years ago. The 2008 financial crisis gradually evolved into a sovereign crisis in the Eurozone. The European Union (EU) found itself under the control of financial markets, divided and unable to respond. “Europe believes that this kind of crisis will not happen, and it is not ready yet”,Interpreted as world Nicolas Jamarioli. Today, the Italian is the secretary general of the European Stability Mechanism (ESM).

This little-known institution in France, located in Luxembourg, is equivalent to a fire station in the Eurozone, and was created in several stages. The first is a rush, starting in June 2010, and then starting in October 2012 to proceed more systematically. Today, if a financial crisis occurs in a member of the single currency, it is ready to quickly mobilize up to 410 billion euros to launch the fire (it has 80 billion euros in equity, and the rest can be borrowed in the market).

On Thursday, October 28, MES will take additional measures. The French Senate must debate the addition of a new privilege to the institution at first reading, this time about the consequences of a possible bank panic. In the case of bank failures, the Eurozone has established a Single Resolution Fund (SRF) since 2016, funded by the banks themselves, and currently has 52 billion euros. If necessary, it can save businesses. “But it may happen that during a severe crisis, several banks need to be rescued and this fund is insufficient.”, Mr. Giammarioli explained. In order to avoid this situation, if funds run out, MES may help FRU.

Support five states

The principled decision on this additional power was made by the Eurozone Minister of Economy at the end of 2020, but requires the approval of all member states. In France, this process should be completed in November: after the Senate passes the text, it will be the turn of the National Assembly. Technical decisions should be passed there without obstacles. “Seven countries have already approved, and we don’t expect any major problems in other member states. Mr. Giammarioli estimatesThe full approval is expected to be completed by the end of the year. “

In pain, by taking it slowly, the single currency will therefore succeed in establishing a very important safety net to avoid new existential crises. There is a paradox: “The stronger Europe is, the less MES needs to be activated. Secretary-General explained. But we will not eliminate fire stations because there is no fire. “

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