European stability mechanism

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European stability
mechanism ESM

ESM logo
 
 
English name European Stability Mechanism
French name Mécanisme européen de stabilité
Organization type International financial institution
status Intergovernmental body under international law
Seat of the organs Luxembourg City , Luxembourg
Chair Klaus Regling
founding September 27, 2012
ESM website
  • ESM members
  • Other EU members

    • The European Stability Mechanism (short ESM , English European Stability Mechanism , French Mécanisme européen de stabilité ) is an international organization based in Luxembourg . It was founded by an international treaty between the member states of the euro zone that came into force on September 27, 2012 and is therefore legally independent of the European Union . Its managing director ( CEO ) is the German Klaus Regling .

    The task of the ESM is to support over-indebted member states of the euro zone with loans and guarantees (linked to reform conditions) in order to ensure their solvency . It is thus part of the so-called " euro rescue package " and on July 1, 2013 largely replaced its predecessor, the European Financial Stability Facility (EFSF).

    prehistory

    Despite the establishment of the EFSF in June 2010, the euro crisis continued. In addition to Greece , Ireland and Portugal were also affected. Due to the foreseeable early expiry of the EFSF in June 2013, there were louder calls to establish a permanent mechanism for crisis situations. After various proposals such as the introduction of so-called Eurobonds or the establishment of a state insolvency regime were rejected by several states - including by the German Chancellor Merkel - the heads of government of the Eurogroup decided at the summit of the European Council on 16-17. December 2010 to expand Art. 136 TFEU to enable the establishment of the ESM. This treaty change was signed on February 2nd, 2012 by the ambassadors of the euro countries.

    On December 9, 2011, the heads of state or government of the euro area agreed to take steps towards a stronger economic union, including a new fiscal pact and increased economic policy coordination, supported by a Treaty on Stability, Coordination and Governance in Economic and Governance Monetary Union (VSKS) is to be implemented. The VSKS aims to help develop a closer coordination of economic policy in the euro area in order to ensure permanent, healthy and stable management of public finances, thus addressing one of the main causes of financial instability. The ESM Treaty and the VSKS Treaty are intended to complement each other in strengthening budgetary responsibility within the European Economic and Monetary Union ; The ESM is "an expression of solidarity within the European Union , but also of the will for collective self-assertion in the international environment." Functionally, the ESM is part of the euro rescue package.

    Goal of the ESM

    The ESM is intended to support insolvent member states of the euro zone , in compliance with economic policy conditions (Article 13 of the ESM Treaty), with loans from the Community of Euro States, whereby other member states of the European Union can also accede to this treaty (Article 44 ).

    The essential instruments of the ESM are emergency loans and guarantees (also known as “liability guarantees”): Over-indebted member states are to receive loans on subsidized terms. The ESM Treaty also stipulates that every member state that receives assistance from the ESM must implement a macroeconomic adjustment program and undertake an in-depth analysis of the sustainability of its public debt situation (Art. 12, Art. 13 Para. 3 ESM Treaty) .

    legal framework

    Founding agreement

    The ESM is based on the “Treaty establishing the European Stability Mechanism between the Kingdom of Belgium, the Federal Republic of Germany, the Republic of Estonia, Ireland, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Italian Republic, the Republic of Cyprus and the Grand Duchy Luxembourg, Malta, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Slovenia, the Slovak Republic and the Republic of Finland ” . This international treaty was passed on January 23, 2012 by the finance ministers of the euro countries and signed by the ambassadors of the member states in Brussels on February 2, 2012. All signatory states have now ratified the treaty.

    The finance ministers of the euro countries also approved the conditions required by the Federal Constitutional Court in Nicosia on September 14, 2012 . The Federal Cabinet approved a corresponding “interpretative declaration” on the ESM Treaty on September 26, 2012; it was decided on September 27, 2012 by the signatory states. The founding agreement came into force on September 27, 2012.

    Signatory ratified comment
    GermanyGermany Germany Yes On June 29, 2012, the Bundestag and Bundesrat each approved the law on the contract of February 2, 2012 on the establishment of the European Stability Mechanism with the required two-thirds majority . The Federal President did not sign this law immediately because of foreseeable constitutional complaints, but only on September 13, 2012, one day after the decision of the Federal Constitutional Court on the urgent motions that had been received up to then. The court had not granted the plaintiffs' requests for an interim order , but had called for additional regulations secured under international law before ratification. After the member states of the euro zone had signed a joint declaration on the interpretation of Article 8, Paragraph 5, Article 32, Paragraph 5, Article 34 and Article 35, Paragraph 1 of the treaty in order to ensure the provisions of the Federal Constitutional Court under international law, the Federal President decided on 27. September 2012 the instrument of ratification signed.
    NetherlandsNetherlands Netherlands Yes Regardless of the differences, the upper house of parliament in the Netherlands approved the ESM on July 3, after the lower house had already voted in June with a two-thirds majority for the euro bailout fund.
    LuxembourgLuxembourg Luxembourg Yes Parliamentary approval on June 26, 2012.
    FinlandFinland Finland Yes The members of the Finnish Parliament voted for the ratification of the ESM Treaty on June 21, 2012. 104 people voted for and 71 against the treaty. However, the Finnish finance minister made it clear on July 6th that her government would not agree to joint liability for the debts and risks of the euro countries. She also rejected a banking union with joint liability. Finland will take a "tough stance" when it comes to bailout plans for the euro zone, Urpilainen said. "We are constructive and want to solve the crisis - but not at any price."
    EstoniaEstonia Estonia Yes The Estonian Chancellor Indrek Teder submitted the treaty to the Estonian Constitutional Court for review in the spring, as he believes Article 4 (4) is contrary to the Constitution. The court published its judgment on July 12, 2012. 10 of the 19 judges rejected the complaint. On August 30, 2012, the Estonian Parliament voted by a majority for the ESM.
    MaltaMalta Malta Yes Parliamentary approval on July 6, 2012.
    SloveniaSlovenia Slovenia Yes Parliamentary approval on April 19, 2012.
    Cyprus RepublicRepublic of cyprus Cyprus Yes Parliamentary approval on May 30, 2012.
    SlovakiaSlovakia Slovakia Yes Parliamentary approval on June 22, 2012.
    FranceFrance France Yes Approval in both chambers on February 28, 2012.
    AustriaAustria Austria Yes On July 4, 2012, the National Council approved the ESM and the fiscal pact with the necessary two-thirds majority . The approval of the Federal President took place on July 17, 2012.
    BelgiumBelgium Belgium Yes The Belgian Parliament ratified the ESM on June 14, 2012. 90 MPs voted yes, 14 no. There were 24 abstentions.
    PortugalPortugal Portugal Yes Parliamentary approval on April 13, 2012.
    GreeceGreece Greece Yes Parliamentary approval on March 28, 2012.
    IrelandIreland Ireland Yes The Supreme Court confirmed the constitutionality of the ESM on July 10, 2012, but referred some legal questions to the European Court of Justice. Until the outcome of the proceedings, the government has suspended the signing of the instrument of ratification.
    ItalyItaly Italy Yes The Italian Senate approved the ESM euro rescue package and the EU fiscal pact on July 12th . On July 19, 2012, the Italian parliament also gave its approval.
    SpainSpain Spain Yes Approval by the Congreso de los Diputados on May 17, 2012 and by the Senado on June 6, 2012.

    In the meantime, the euro countries Latvia and Lithuania have also joined.

    Entry into force of the ESM Treaty

    The treaty required ratification , approval or acceptance by the signatories. It came into force on the day on which the instruments of ratification, approval or acceptance had been deposited with the General Secretariat of the Council of the European Union by so many signatory countries that their initial drawings accounted for at least 90% of the total agreed drawings. This condition was fulfilled by depositing the German instrument of ratification on September 27, 2012 and announced in Germany on October 1, 2012 ( Federal Law Gazette II p. 1086 ).

    Legal form and seat of the ESM

    The European Stability Mechanism is an independent, international financial institution (Art. 1). It has its seat and head office in Luxembourg and can set up a liaison office in Brussels (Art. 31). The ESM has full legal personality and has unlimited legal capacity. It is institutionally independent of the EU. The ESM is exempt from any restrictions, authorization and licensing obligations that otherwise apply to credit institutions and financial services companies (Art. 32).

    Capital resources of the ESM

    The initial share capital of the ESM is 700 billion euros. According to the terms of the ESM treaty, Germany accounts for 190 billion euros. If Germany has to take over the shares of the countries at risk of failure, Portugal, Greece, Spain and Italy, the amount increases by 110 billion euros (190 + 110 = 300). The following table shows the ESM members with their respective percentage shares in the ESM, their subscribed and paid-in capital.

    Euro country Share in the ESM
    in%     		subscribed capital
    in billions of euros     		paid-in capital
    in billions of euros
    AustriaAustria Austria 2.7644 19.48 2.23
    BelgiumBelgium Belgium 3.4534 24.34 2.78
    Cyprus RepublicRepublic of cyprus Cyprus 0.1949 1.37 0.16
    EstoniaEstonia Estonia 0.1847 1.30 0.15
    FinlandFinland Finland 1.7852 12.58 1.44
    FranceFrance France 20.2471 142.70 16.31
    GermanyGermany Germany 26.9616 190.02 21.72
    GreeceGreece Greece 2.7975 19.72 2.25
    IrelandIreland Ireland 1.5814 11.14 1.27
    ItalyItaly Italy 17.7917 125.40 14.33
    LatviaLatvia Latvia 0.2746 1.93 0.22
    LithuaniaLithuania Lithuania 0.4063 2.86 0.33
    LuxembourgLuxembourg Luxembourg 0.2487 1.75 0.20
    MaltaMalta Malta 0.0726 0.51 0.06
    NetherlandsNetherlands Netherlands 5.6781 40.02 4.57
    PortugalPortugal Portugal 2.4921 17.56 2.01
    SlovakiaSlovakia Slovakia 0.8184 5.77 0.66
    SloveniaSlovenia Slovenia 0.4247 2.99 0.34
    SpainSpain Spain 11.8227 83.33 9.52
    total 100.0000 704.80 80.55

    The ESM is regularly financed on the financial market. In the auction of money market paper with a term of three months in February 2013, the knockdown was made at a yield of 0.0158%. At the first auction, investors accepted a negative interest rate of 0.0324%.

    Accounting by the ESM

    The ESM publishes an annual report with audited annual financial statements and sends the ESM members a summarized quarterly financial statement and a profit and loss account showing the result of its operations (Art. 27). The auditors for the annual financial statements of the ESM are appointed by the Board of Governors (Art. 29).

    Confidentiality and Immunity

    Persons who work or have worked for the ESM or in connection with it are subject to professional confidentiality (Art. 34). The members of the Board of Governors, the members of the Executive Board and all employees of the ESM also enjoy immunity from jurisdiction with regard to their actions in an official capacity and inviolability with regard to their official documents and records (Art. 35).

    Exit from the ESM

    The ESM contract itself does not provide for an option for individual members to opt out. An international law accepted unilateral termination would be so only under "exceptional circumstances" in accordance with Article 54 et seq. Of the Vienna Convention possible.

    Structure and voting rules

    The organs of the ESM consist of a board of governors, a board of directors with an executive director (CEO) and other staff members deemed necessary.

    Board of Governors

    The Board of Governors is made up of the representatives of the ESM member countries who are responsible for finances: Each member country appoints a member of the Board of Governors and an alternate member. The Board of Governors elects a chairman and a deputy chairman from among its members for a term of two years (Art. 5, Paragraph 2). If the chairman is no longer finance minister in his country, a new election takes place.

    The ESM began its operational activities with the founding meeting of the Board of Governors on October 8, 2012.

    Directory

    Each member of the Board of Governors appoints one member and one alternate member to the Board of Directors . The Board of Directors is to ensure that the ESM is managed in accordance with the contract and the statutes. It takes the decisions that are incumbent on it in accordance with the ESM Treaty or that are delegated to it by the Board of Governors.

    Executive Director

    The Executive Director is appointed by the Board of Governors for a five-year term. A one-time reappointment is possible, as is the early termination of the term of office by resolution of the Board of Governors. He must be a citizen of an ESM member country and may not belong to the Board of Governors or the Board of Directors (Art. 7 Para. 1). A basic salary of EUR 324,000 gross annually is planned for the managing director.

    The Executive Director represents the ESM externally, conducts day-to-day business and is in charge of all ESM employees. He is responsible for the organization, appointment and dismissal of the employees in accordance with the employment conditions to be decided by the Board of Directors (Art. 7 Para. 4 and 5).

    Servants

    ESM staff are appointed or dismissed by the Executive Director . Their salaries and other remuneration are subject to an internal tax in favor of the ESM. From the day this tax is levied, these salaries and emoluments are exempt from the respective national income tax (Art. 36 (5)).

    At the end of 2012, the rescue fund will initially have around 75 employees. For executive employees salaries of 64,000 to 167,000 euros are provided.

    Voting rules

    The ESM Treaty contains complex voting rules for decisions of the Board of Governors and the Board of Directors. According to Art. 4, the Board of Governors and the Board of Directors have a quorum if 2/3 of the voting members are present, who have at least 2/3 of the votes.

    According to Art. 4 (7), the voting rights of a country correspond to the respective participation of the country in the ESM (see table above).

    If there is a quorum, the Board of Directors or the Board of Governors decide by mutual agreement, with a qualified majority or with a simple majority. A qualified majority requires 80% of the votes. Decisions by mutual agreement generally require unanimity, but are not prevented by absent members and abstentions. In urgent cases, a decision by mutual agreement requires the approval of only 85% of the votes cast. According to Art. 5 (5), most of the fundamental decisions of the Board of Governors require decisions by mutual agreement.

    Based on these regulations, Germany and France, which have 26.9616% and 20.2471% of the voting rights, respectively, can prevent resolutions by mutual agreement and resolutions by qualified majority, provided that the respective representatives attend the meeting and vote "no". Italy has 17.7917% of the voting rights, so Italy can also prevent decisions by mutual consent. However, Italy cannot prevent qualified majority decisions. All other countries can neither prevent urgent decisions by mutual agreement nor decisions by qualified majority. Since an abstention does not conflict with a resolution by mutual agreement, Sections 4 and 5 of the ESM Financing Act oblige the German representatives in the Board of Governors and the Board of Directors to expressly reject a proposal, unless the German Bundestag or its budget committee has passed a resolution in favor.

    Financial risk for the Federal Republic of Germany

    The ESM treaty limits Germany's financial liability to EUR 190 billion. In the summer of 2012, however , the university professor Stefan Homburg denied the existence of an upper limit of liability. According to Homburg, Germany's liability could be increased at will without changing the treaty. Parliamentary State Secretary in the Federal Ministry of Finance, Steffen Kampeter, countered this thesis . The chief editor Rainer Hank of the Frankfurter Allgemeine Sonntagszeitung compared the positions and supported Homburg's criticism.

    As a result of this debate, the Federal Constitutional Court, in its ruling of September 12, 2012, called for additional international law provisions in order to exclude liability risks. The Federal Government complied with this requirement by submitting a declaration of interpretation to the contracting parties : It affirmed that the ESM Treaty should be interpreted in such a way that liability is limited to the respective share of the share capital. The wording of the declaration of interpretation is an essential contractual basis, so that a later different interpretation according to principles of international law could justify termination. Germany only deposited its instrument of ratification after all contracting parties had signed the declaration of interpretation.

    ESM stability aids

    According to the wording of the treaty, those states that have ratified the Fiscal Compact can receive stability support from the ESM . In addition, the ESM continues the programs of the replaced EFSF .

    The text of the contract distinguishes between the following measures: precautionary ESM financial assistance (Art. 14), financial assistance for the recapitalization of banks (Art. 15), loans (Art. 16), primary market support facilities (Art. 17) and secondary market support facilities (Art. 18 ). According to the opening clause in Art. 19, the Board of Governors can add to the above list at will.

    Contrary to the wording of the treaty, which only provides for payments to member states , the Board of Governors decided on December 8, 2014 a radical expansion of the range of instruments based on Art. 19: In future, the ESM will be able to recapitalize or subsidize banks directly . The supported bank's country of residence is not intermediary and its sovereign debt ratio remains unchanged. The lawyer Dietrich Murswiek sees this expansion of competencies as a violation of the contract.

    The programs are listed below in chronological order:

    • Ireland and Portugal: These two countries originally received funding from the EFSF . Management was later taken over by the ESM. The program for Ireland closed on December 8, 2013, and the program for Portugal on May 18, 2014.
    • Spain: On July 20, 2012, the Eurogroup promised Spain financial support of up to 100 billion euros. Of this, EUR 41.3 billion had been paid out by the end of the program on December 31, 2013.
    • Cyprus: On April 24, 2013, the Board of Governors approved a program for Cyprus worth 10 billion euros. The ESM is to take on EUR 9 billion and the IMF EUR 1 billion of this. By the end of the program on March 31, 2016, Cyprus had withdrawn € 6.3 billion.
    • Greece 2015: On August 19, 2015, the Board of Directors and the Board of Governors approved another program for Greece worth € 86 billion. A first partial amount of 10 billion euros was paid out the following day.

    Development of grants

    The following table lists the grants from the ESM and EFSF, insofar as they were still outstanding for repayment by the respective quarter.

    quarter Greece Portugal Ireland Spain Cyprus TOTAL
    1st quarter 2011 - - € 3.6 billion - - € 3.6 billion
    2nd quarter 2011 - € 5.9 billion € 3.6 billion - - € 9.5 billion
    3rd quarter 2011 - € 5.9 billion € 3.6 billion - - € 9.5 billion
    4th quarter 2011 - € 6.9 billion € 7.6 billion - - € 14.5 billion
    1st quarter 2012 € 40.5 billion € 9.6 billion € 9.3 billion - - € 59.4 billion
    2nd quarter 2012 € 81.0 billion € 14.8 billion € 12.0 billion - - € 107.8 billion
    3rd quarter 2012 € 81.0 billion € 17.4 billion € 12.0 billion - - € 110.4 billion
    4th quarter 2012 € 81.0 billion € 18.2 billion € 12.0 billion € 39.5 billion - € 150.7 billion
    1st quarter 2013 € 113.0 billion € 19.0 billion € 12.0 billion € 41.3 billion - € 185.3 billion
    2nd quarter 2013 € 130.5 billion € 21.1 billion € 14.4 billion € 41.3 billion € 3.0 billion € 210.3 billion
    3rd quarter 2013 € 133.5 billion € 21.1 billion € 15.4 billion € 41.3 billion € 4.5 billion € 215.8 billion
    4th quarter 2013 € 133.5 billion € 24.8 billion € 17.7 billion € 41.3 billion € 4.6 billion € 221.9 billion
    1st quarter 2014 € 133.5 billion € 24.8 billion € 17.7 billion € 41.3 billion € 4.6 billion € 221.9 billion
    2nd quarter 2014 € 139.8 billion € 26.0 billion € 17.7 billion € 41.3 billion € 4.75 billion € 229.55 billion
    3rd quarter 2014 € 141.8 billion € 26.0 billion € 17.7 billion € 39.7 billion € 5.35 billion € 230.55 billion
    4th quarter 2014 € 141.8 billion € 26.0 billion € 17.7 billion € 39.7 billion € 5.7 billion € 230.9 billion
    1st quarter 2015 € 130.9 billion € 26.0 billion € 17.7 billion € 38.2 billion € 5.7 billion € 218.5 billion
    2nd quarter 2015 € 130.9 billion € 26.0 billion € 17.7 billion € 38.2 billion € 5.7 billion € 218.5 billion
    3rd quarter 2015 € 143.9 billion € 26.0 billion € 17.7 billion € 35.7 billion € 5.8 billion € 229.1 billion
    4th quarter 2015 € 152.3 billion € 26.0 billion € 17.7 billion € 35.7 billion € 6.3 billion € 238.0 billion
    1st quarter of 2016 € 152.3 billion € 26.0 billion € 17.7 billion € 35.7 billion € 6.3 billion € 238.0 billion
    2nd quarter of 2016 € 159.8 billion € 26.0 billion € 17.7 billion € 35.7 billion € 6.3 billion € 245.5 billion
    3rd quarter 2016 € 159.8 billion € 26.0 billion € 17.7 billion € 35.7 billion € 6.3 billion € 245.5 billion
    4th quarter 2016 € 162.6 billion € 26.0 billion € 17.7 billion € 34.7 billion € 6.3 billion € 247.3 billion
    1st quarter 2017 € 160.6 billion € 26.0 billion € 17.7 billion € 34.7 billion € 6.3 billion € 245.3 billion
    2nd quarter 2017 € 160.6 billion € 26.0 billion € 17.7 billion € 33.7 billion € 6.3 billion € 244.3 billion
    3rd quarter 2017 € 168.3 billion € 26.0 billion € 17.7 billion € 33.7 billion € 6.3 billion € 252.0 billion
    4th quarter 2017 € 169.1 billion € 26.0 billion € 17.7 billion € 31.7 billion € 6.3 billion € 250.8 billion
    1st quarter 2018 € 174.8 billion € 26.0 billion € 17.7 billion € 29.7 billion € 6.3 billion € 254.5 billion
    2nd quarter 2018 € 175.8 billion € 26.0 billion € 17.7 billion € 26.7 billion € 6.3 billion € 252.5 billion

    Criticism of the ESM treaty

    Constitutional issues

    The ratification of the ESM Treaty was accompanied by implementing laws in the member states. In Germany these were the ESM Ratification Act, the ESM Financing Act (ESMFinG) and an amendment to the Federal Debt Management Act. After these laws were passed by the Bundestag and Bundesrat, several groups and individuals filed constitutional complaints and an organ complaint with the Constitutional Court. They were accompanied by applications for an interim order, according to which the Federal President was not allowed to sign and draft the passed laws until the decision on the respective main issue was made. In response to a request from the Federal Constitutional Court, the Federal President announced that he would only sign the law after the Federal Constitutional Court had decided.

    In terms of content, the plaintiffs asserted, as in previous proceedings against the EFSF , some of which had been brought by the same plaintiffs, that the European stability mechanism would entail liability risks for the Federal Republic of Germany that were unlimited in amount. In the worst case, Germany would be burdened with such high expenditures that the German Bundestag would not be able to design the budget and the overall budgetary responsibility of the parliament would "run empty". According to earlier case law of the Constitutional Court, this would invalidate the right of Germans to vote under Article 38 of the Basic Law because the Bundestag could no longer fulfill its main responsibility. In some cases, the plaintiffs asserted different further claims, so that the Bundestag as a whole would have to decide on authorizations within the framework of the ESM and not just the finance committee or the ESM contract would give the Board of Directors excessive immunity claims without justification.

    The Bundestag member Peter Gauweiler , a group around constitutional lawyer Karl Albrecht Schachtschneider , who, like Gauweiler, has lodged several constitutional complaints against steps towards integration of the European Union, complained. The publicist Bruno Bandulet and the economics professors Wilhelm Hankel , Joachim Starbatty and Wilhelm Nölling are complaining with him . The complaint was supported by the Free Voters , the association Mehr Demokratie , whose constitutional complaint had been joined by 11,692 individuals, the members of the parliamentary group Die Linke , Johannes Schorr, the members of the parliamentary group of Free Voters in Bavaria. The left parliamentary group also brought an organ charge .

    On September 12, 2012, the Federal Constitutional Court rejected the aforementioned urgent motions. It connected conditions with it; For example, when ratifying, Germany would have to declare in a binding manner under international law that secrecy at the ESM would not prevent the Bundestag from being fully informed in terms of content, and clarification of formulations that could also be understood differently, that Germany's payment obligation is limited to the authorized capital of the ESM of EUR 190 billion and an increase in this amount would only take place with the participation of the bodies in which Germany has a veto right. As a result, all member states of the ESM issued a corresponding declaration, a renewed urgent application by the plaintiffs regarding the form of this declaration was rejected by the Federal Constitutional Court on December 17, 2013.

    The hearing in the main proceedings was set by the court on June 11 and 12, 2013; on March 18, 2014, the court finally dismissed the lawsuits. In the decision, the court rejected the plaintiffs' argument that the Federal Republic's maximum liability under the ESM would not burden the federal government to such an extent that the overall budgetary responsibility of parliament would be devalued. However, it made one condition: the legislature must ensure, under budget law, that the Federal Republic of Germany can meet capital calls under the ESM Treaty on time and in full. This is crucial because defaulting payers lose their voting rights in the ESM bodies and in this case the feedback of all decisions in the ESM to the German representatives and, through them, to the Bundestag and ultimately the voters would be lost. Because the ESM Treaty provides for short periods of three and two months, and in individual cases only two weeks for payments, the mechanisms of the Basic Law may not be sufficient for a supplementary budget . An emergency budget according to Art. 112 GG would not be considered if the payment obligation had already been foreseeable as possible. The Bundestag must therefore take into account expected obligations to the ESM when drawing up the federal budget and include them in the budget.

    ESM treaty with no right of withdrawal

    It is criticized that the ESM is designed to be permanent and that there is no right of withdrawal for ESM member states. According to international law, it is only possible to terminate the contract if the basic principles have changed overall. In the run-up to the vote in Germany on June 29, 2012 on the overall package of measures to save the euro, there were different interpretations. The German federal government took the view that the interests of the individual federal states were "not affected in matters of the ESM" and that it was an international treaty.

    Loss of sovereignty

    The members of the Board of Governors are government members of the respective ESM members with responsibility for finances, which, in the opinion of critics, relinquishes the respective financial or budget sovereignty in questions of the own national budget.

    Every member state that receives assistance from the ESM has to implement a macroeconomic adjustment program, ie comply with economic policy conditions (Art. 13). As a creditor , the IMF has priority over the ESM (preamble to the treaty, p. 8, no. 13).

    Liability and capital calls

    It is criticized that the ESM management can demand the remaining liability capital (currently up to 620 billion euros) with a simple majority.

    The liability of private creditors to share losses is far too vague for the taxpayers' association . The ESM treaty preamble only mentions participation in “exceptional cases”.

    Insufficient credit volume

    The IMF and the OECD have repeatedly warned that the measures of the euro rescue package that have been planned so far will not be sufficient if large euro countries get into trouble.

    Lending not transparent

    The fact that ESM loans are granted by the Board of Governors and that no objective, transparent criteria are defined here has been criticized. Article 34 stipulates that the members of the Board of Governors and the Executive Board, as well as all other persons who work or have worked for the ESM, are subject to a statutory duty of confidentiality, including vis-à-vis their own member states. The only decision-making factor for activating the ESM is whether “this is indispensable in order to maintain the stability of the euro area”, which was understood as a purely subjective, political decision-making criterion. Decisions on the allocation of ESM funds are final. In the case of “imminent danger”, the granting of loans and liabilities can be decided by a qualified majority of 85 percent of the share capital, which, according to critics, potentially disadvantages smaller states.

    German critics

    Bundesbank

    The Bundesbank warned in an official statement of 19 September 2011: "The decisions of state and government of the euro area and the EU institutions of 21 July 2011 changes were made to the reform project again at crucial points. It was decided to significantly expand the toolbox of the EFSF (and the future ESM). [...] With these resolutions, another big step is taken towards joint liability and less discipline on the part of the capital markets, without, in return, the ability to control and influence national financial policies being noticeably increased. "

    At the meeting of EU finance ministers and central bank chiefs in Wroclaw on September 17, 2011, Bundesbank President Jens Weidmann rejected the bond purchases by the European rescue fund EFSF. Weidmann denied the option of equipping the rescue fund with a banking license in order to get fresh money from the ECB for bond purchases on the grounds that the political independence of the ECB should not be used to finance national debt, "regardless of whether it was indirectly or directly" . However, the ESM does not need a banking license as it is granted one by the contract.

    Court of Auditors

    On September 13 and 14, 2011, the conference of the Federal and State Audit Office presidents took place in Wiesbaden. The participants advocated the establishment of effective public financial control of the ESM with audit rights.

    Expert Council

    In the opinion of the Council of Economic Experts , the European Stability Mechanism has not yet resolved the problem that triggering the restructuring remains a political decision. The possibility of a delay in bankruptcy still exists, which is why the consequences of sovereign debt crises for creditors are still difficult to predict. He also calls for a permanent decoupling of the banking and debt crisis as a necessary supplementary element.

    ifo institute

    The introduction of the European stabilization mechanism was criticized, among others, by the Ifo Institute for Economic Research , whose former president Hans-Werner Sinn warned that the rescue package for Germany was “an incalculable adventure” and “a sure brake on growth”. He justified this, among other things, with the fact that Germany was de facto assuming the guarantee for the debts of the other euro countries and this would increase the refinancing costs for the German state. He advocates the controlled termination of the billion-dollar transfers to needy countries and criticizes the German government and the German Bundestag for failing to demand clear credit terms to weaken the euro and endanger the work of European unification.

    Political parties

    The FDP parliamentarian and financial politician Frank Schäffler has been vehemently criticizing the rescue package for a long time. Among other things, he accuses the European Council of committing “collective legal violations” of the no-bailout clause and of striving for “economic centralization and the unlimited primacy of politics over the economy in the European Union” and a “monetary planned economy”. An FDP membership decision was prepared by him and other FDP politicians such as Burkhard Hirsch .

    The result will be announced on December 16, 2011. 20,364 members took part (of which 20,178 cast a valid ballot). The quorum of 33% of the members was missed - the membership decision was therefore formally a member survey. Application A by the Schäffler group accounted for 44.2%, and application B by the federal executive committee accounted for 54.4%.

    There is also criticism from some CSU politicians, such as Bundestag member Peter Gauweiler , who do not want to support the Merkel government's plan. In September 2012, CSU General Secretary Alexander Dobrindt sharply criticized the recently announced decision of the ECB to buy government bonds.

    From the ranks of the Greens reports Hans-Christian Stroebele significant concerns to. The crisis has already reached historical dimensions and democracy is in acute danger. The decision as to whether he will agree to the ESM will still be carefully weighed up. He rejected the ESM in the vote.

    A few politicians from the ranks of the SPD , such as members of the Bundestag Peter Danckert and Swen Schulz, reject the ESM for constitutional reasons, as parliamentary rights are being given up.

    From the ranks of the Left Party , the ESM is rejected as a whole, because, among other things, it would result in a wrong redistribution policy in favor of international financial speculators. A referendum is called for. Left-wing politicians like Gregor Gysi fear that the ESM will lead to social cuts through the EU bureaucracy and that “economic policy instruments [...] to maintain welfare state guarantees” will be abolished. Die Linke commissioned an expert opinion from the Bundestag's Scientific Service , which it presented on September 5, 2012. The report sees the budget law of the German Bundestag violated by the ESM, since a "possibly direct and potentially indefinite liability" is assumed for the debts of other states.

    The Free Voters party rejects the ESM. By rejecting the ESM in the 2013 federal election, she wanted to make the leap into the Bundestag, but it did not succeed. With nationwide demonstrations, Monday demos and rallies with the alliance partners Zivile Koalition e. V. and the Bund der Steuerpayers BdSt, the ESM was publicly criticized. The FREE VOTERS parliamentary group in the Bavarian state parliament was the first parliamentary group in a state parliament to take legal action before the Federal Constitutional Court against the ESM and the fiscal pact.

    Economists

    The chairman of the Regulatory Policy Foundation and the Center for European Politics , Lüder Gerken , criticizes the fact that the stability mechanism does not grasp the core of the problem of the southern European countries: This does not lie in the national debt alone, but in the debt of the national economy as a whole due to the persistent current account deficit . This can only be countered through reforms in the real economy . Such reforms are foreseen in the agreed mechanisms by making the granting of grants subject to "strict conditions"; Gerken points out, however, that in practice these requirements cannot be enforced with the necessary rigor, since the other euro states can hardly refuse financial aid to a member state at risk of insolvency and their negotiating position is therefore weakened. Gerken sees in this delay of necessary internal reforms the danger of a permanent use of the stability pact by some countries and regards the measures as - not intended, but accepted - way into the "debt union".

    The economist Max Otte criticized the planned European regulation for a stabilization mechanism to secure the euro and the position of Chancellor Angela Merkel : "Billionaires and oligarchs - these are the actors that we 'save'."

    Association of Taxpayers

    After it became known that the ESM was being brought forward in 2012, the taxpayers' association asked the German Bundestag on December 5, 2011 to refuse to give its approval to the creation of an ESM in any case. The following ESM mechanisms were criticized:

    • the ESM Board of Governors can ultimately approve unlimited loan amounts;
    • the taxpayer guarantees are unlimited;
    • no right of withdrawal for ESM member states;
    • insufficient participation of private creditors.

    The taxpayers' association feared for Germany's fiscal sovereignty. In addition, the early introduction is putting the national parliaments under additional pressure.

    Initiatives against the ESM

    In the non-partisan alliance Bürgerwille, thousands of citizens, including Well-known people from science, politics and society have come together to take action against the euro bailout policy.

    With the support of the Taxpayers Association, ten members of the Bundestag founded an “Alliance against the ESM” in May 2012. The temporary EFSF rescue package must expire in 2013 as planned. The permanent successor institution ESM should not exist, demanded the MPs Klaus-Peter Willsch (CDU) and Sylvia Canel (FDP).

    In June 2012, 40 ESM opponents, mainly from research and science, turned to Chancellor Angela Merkel in an “Extra-Parliamentary Major Inquiry”. The request was linked to a request for a dialogue "before irreversible and disastrous decisions are made in connection with the ESM and the Fiscal Compact".

    At the end of June 2012, Attac Aachen started a controversial postcard campaign that equated approval of the Fiscal Compact and the ESM with the Enabling Act of 1933. After the campaign became known, Attac Germany distanced itself from it.

    Austria

    In November 2012, the chairman of the FPÖ and the Carinthian provincial government submitted largely identical complaints against the ESM Treaty to the Austrian Constitutional Court. This did not happen before the final ratification, because an international treaty such as the ESM Treaty in Austria first has to be announced in the Federal Law Gazette for the Republic of Austria before a constitutional complaint is possible against it. However, this will only take place when the treaty has also entered into force under international law.

    The Innsbruck European lawyer Walter Obwexer criticizes the following: “In contrast to other EU institutions, such as the EU Commission, no parliamentary control is provided. There is also no parliamentary influence on his work. With a few exceptions (e.g. ECJ competence in arbitration proceedings), the ESM is not integrated into any existing system of separation of powers. Its activities are not public and not transparent. ”The board of directors would thus invest the paid-in capital at its own discretion. The ESM would also have the option of taking out loans. Obwexer criticizes that despite these permitted financial transactions, no audit by the EU Court of Auditors is planned. According to the contract, the audit of the accounts is carried out by external auditors commissioned by the Board of Governors.

    Netherlands

    ESM opponents in The Hague

    The Christian party ChristenUnie did not want to vote for the ESM. The Socialist Party had also announced that it would reject the ESM Treaty. The PVV boss Geert Wilders had announced its intention to seek an injunction against the state. For him, too much power is being surrendered to Brussels and he considered the transitional government at the time insufficiently legitimized to ratify a far-reaching treaty like the one establishing the ESM.

    The Dutch Court of Auditors described the lack of auditing as an "important loophole" in the ESM Treaty.

    Ireland

    Irish MEP Thomas Pringle, Independent MP for the constituency of Donegal South West, lodged a constitutional complaint in Ireland against the Fiscal Compact and the ESM. His appeals were ultimately unsuccessful.

    reform

    After years of negotiations, the EU finance ministers agreed on a reform of the ESM on November 30, 2020. On January 27 and February 8, 2021, the ESM member states signed the agreement to amend the ESM treaty. Since then it has been in the process of ratification .

    Ratification of the reform in Germany

    In June 2021, the German Bundestag passed a law to implement the reform, which the Bundesrat also approved. However, seven members of the Bundestag of the FDP lodged a constitutional complaint against this because the law had the character of an amendment to the Basic Law and therefore a two-thirds majority was required. At the request of the Federal Constitutional Court , Federal President Frank-Walter Steinmeier temporarily suspended the execution of the law on July 1, 2021, which means that it cannot come into force for the time being.

    Web links

    Commons : European Stability Mechanism  - collection of images, videos and audio files
    Commons : Demonstrations and protests against the ESM  - collection of pictures, videos and audio files

    Individual evidence

    1. ↑ a b Federal Law Gazette III No. 138/2012
    2. ↑ Quoted from Michael Staack , in: ders. (Ed.): Introduction to International Politics. Study book. 5th edition. Oldenbourg Verlag, Munich 2012, p. 256.
    3. ↑ Signing of the ESM Treaty , website of the Federal Ministry of Finance, accessed on June 16, 2012.
    4. ↑ BT Plenary Protocol No. 17/188, BR Plenary Protocol No. 898
    5. ↑ Request from the Federal Constitutional Court to draw up the laws on the ESM and the fiscal contract. The Federal President, June 21, 2012, accessed on June 7, 2017 .
    6. ↑ Federal Constitutional Court: BVerfG, judgment of the Second Senate of September 12, 2012 - 2 BvR 1390/12 - Rn. (1-215) . September 12, 2012 ( online ).
    7. ↑ Finland and the Netherlands are criticized for blocking the ESM. In: Focus Online. July 3, 2012, accessed June 7, 2017 .
    8. ↑ Against joint liability. Finland is flirting with leaving the euro. In: n-tv online. June 6, 2012, accessed June 7, 2017 .
    9. ↑ Eveli Kuklane: The constitutionality of the treaty establishing the European stability mechanism shall be deliberated by the supreme court en banc. March 26, 2012, accessed June 7, 2017 .
    10. ↑ Euro rescue package: Estonian Constitutional Court approves ESM
    11. ↑ Estonia ratifies ESM  ( page no longer available , search in web archives )@1@ 2Template: Toter Link / www.stern.de
    12. ↑ Le Parlement ratifie le Mécanisme européen de stabilité Le Monde Online, February 28, 2012 (fr)
    13. ↑ Parliament votes for ESM and Fiscal Compact
    14. ↑ Federal President Heinz Fischer signs the Fiscal Compact and the ESM Treaty ( Memento of August 13, 2012 in the Internet Archive ) Website of the Federal President of Austria, July 17, 2012.
    15. ↑ Belgian Parliament ratifies ESM , article of June 15, 2012, accessed on June 21, 2012.
    16. ↑ Belgium votes for the ESM rescue fund. (No longer available online.) Zeit Online , June 15, 2012, archived from the original on September 13, 2014 .;
    17. ↑ Parlamento português aprova pacto fiscal da União Europeia Reuters, April 13, 2012 (pt)
    18. ↑ Science and Politics Foundation / ratification stands
    19. ↑ Italy blesses the euro rescue package from Handelsblatt Online, July 19, 2012.
    20. ↑ ESM factsheet. (PDF; 558 kB) European Stability Mechanism, July 28, 2017, accessed on July 28, 2017 (English).
    21. ↑ Handelsblatt February 5, 2013: "Euro rescue package ESM must offer investors returns for the first time"
    22. ↑ Answer of the Parliamentary State Secretary Steffen Kampeter to a question from the MP Sahra Wagenknecht (PDF; 3.1 MB)
    23. ↑ a b Die Welt: ESM boss earns more than Merkel
    24. ↑ ESM Treaty (consolidated 03-02-2015). (PDF; 271 kB) (No longer available online.) European Stability Mechanism, February 3, 2015, archived from the original on May 27, 2015 ; accessed on July 10, 2015 .
    25. ^ Text of the ESM Financing Act
    26. ↑ Stefan Homburg in FAS from July 28, 2015 .
    27. ↑ Steffen Kampeter in FAS from August 3, 2012.
    28. ↑ Rainer Hank in FAS from August 4, 2012 .
    29. ↑ Judgment of the Federal Constitutional Court of September 12, 2012.
    30. ↑ Federal Law Gazette 2012 II p. 1086
    31. ↑ ESM press release of December 8, 2014.
    32. ↑ The capital letter of December 14, 2014.
    33. ↑ ESM press release of December 8, 2013.
    34. ↑ ESM press release of May 18, 2014.
    35. ↑ ESM press release of December 31, 2013.
    36. ↑ ESM press release of April 24, 2013.
    37. ↑ Cyprus leaves the euro rescue package (ESM). Handelsblatt, March 13, 2016, accessed on March 31, 2016 .
    38. ↑ ESM press release of August 19, 2015
    39. ↑ ESM press release of August 20, 2015
    40. ^ ESM - Financial Assistance
    41. ↑ FAZ Online: Europe looks to Karlsruhe , July 1, 2012.
    42. ↑ Press release from the Office of the Federal President , full statement on June 21, 2012.
    43. ↑ Federal Constitutional Court: Decision 2 BvR 1390/12 of March 18, 2014 , paragraph 122
    44. ^ Lawsuit and representation by Peter Gauweiler ( Memento of October 30, 2012 in the Internet Archive ) (PDF; 294 kB)
    45. ↑ Frankfurter Allgemeine Zeitung - Wirtschaft (July 10, 2012): Urgent motions against ESM and Fiscal Pact: Schäuble warns judges of "rejections"
    46. ↑ Jan Hildebrand, Dorothea Siems and Christian Unger: ESM - Four men against the European rescue package. In: Hamburger Abendblatt. Axel Springer AG, July 3, 2012, accessed on July 10, 2012 .
    47. ↑ mehr-demokratie.de
    48. ↑ Lawsuit and representation of the Bundestag parliamentary group ( Memento of October 16, 2012 in the Internet Archive ) (PDF; 1.3 MB)
    49. ↑ Constitutional complaint and representation of Johannes Schorr ( Memento of March 26, 2013 in the Internet Archive ) (PDF; 878 kB)
    50. ↑ Complete application of July 25, 2012
    51. ↑ Karlsruhe negotiates ESM lawsuits in June. In: Frankfurter Allgemeine Zeitung . April 19, 2013. Retrieved April 19, 2013 .
    52. ↑ BVerfG, 2 BvR 1390/12 of December 17, 2013
    53. ↑ Final verdict: Karlsruhe rejects lawsuits against the euro rescue package. In: Spiegel Online. March 18, 2014, accessed July 22, 2018 .
    54. ↑ Federal Constitutional Court: Decision 2 BvR 1390/12 of March 18, 2014 , paragraph 158
    55. ↑ Federal Constitutional Court: Decision 2 BvR 1390/12 of March 18, 2014 , paragraph 210
    56. ↑ http://dipbt.bundestag.de/dip21/btd/17/096/1709670.pdf German Bundestag printed matter 17/9670
    57. ↑ The ESM threatens Germany , Association of Tax Payers, accessed on June 16, 2012.
    58. ↑ Handelsblatt, edition of 8./9./10. June 2012, p. 11: Banking license for the ESM - Unlimited firepower with risks and side effects
    59. ↑ The European ESM rescue package - a blatant gag agreement Die Presse , June 28, 2012.
    60. ↑ bundesbank.de: Statement ( memento of November 20, 2012 in the Internet Archive ) by Jens Weidmann , President of the Deutsche Bundesbank
    61. ↑ Bond purchases by the ECB: Bundesbank boss warns of billion-dollar risks spiegel.de (September 17, 2011)
    62. ↑ Article 32 (9) of the ESM Treaty
    63. ↑ rechnungshof-hessen.de: Presidents of the Court of Auditors met in Wiesbaden ( Memento of October 18, 2011 in the Internet Archive ) (PDF)
    64. ↑ Council of Experts, Taking Responsibility for Europe. S. 144. (PDF; 849 kB).
    65. ↑ Council of Experts, Taking Responsibility for Europe. P. 146 (PDF).
    66. ↑ Handelsblatt , May 20, 2010: “Wrong decision”: Ifo Institute damn euro rescue package
    67. ↑ Süddeutsche Zeitung , April 2, 2011, No. 77, p. 24: Tickende Zeitbombe, What Merkel and the Bundesbank are hiding: The rescue package does not save the euro - but it places enormous risks on Germany
    68. ↑ Orwellian EU ( Memento from June 9, 2011 in the Internet Archive ) (June 6, 2011)
    69. ↑ Welt Online : Liberal euro rebels have almost 900 signatures
    70. ^ FAZ : FDP membership decision: Narrow victory over euro skeptics
    71. ↑ FDP : FDP MEMBERS COMMIT themselves to EUROPE ( Memento from September 4, 2014 in the Internet Archive )
    72. ↑ a b Spiegel Online (September 10, 2012): Legal experts of the Bundestag warn against ESM
    73. ↑ Hans-Christian Ströbele (Greens) in conversation with Abopteren-Check.de ( memento from November 18, 2011 in the Internet Archive ), accessed on June 18, 2012
    74. ↑ tagesschau.de : The Left Party wants a referendum on the fiscal pact
    75. ^ Gregor Gysi : Premises of German foreign policy from a left perspective. Atlantic Initiative , July 24, 2012, accessed August 21, 2012 .
    76. ^ FW Bundesvereinigung: Use all constitutional means to fight the ESM and the Fiscal Compact ( Memento from June 6, 2012 in the Internet Archive )
    77. ↑ YouTube video with Aiwanger: 5 questions - 5 answers about the ESM
    78. ↑ Civil coalition: Anti-ESM panel discussion in Munich ( Memento from February 12, 2013 in the web archive archive.today )
    79. ↑ FREE VOTERS Parliamentary group: lawsuit before the Federal Constitutional Court against ESM and Fiscal Compact
    80. ^ "A bottomless pit" , FAZ from March 30, 2011.
    81. ↑ Interview with Max Otte: Rescuing the euro is demagoguery focus.de (July 8, 2011)
    82. ↑ Archived copy ( Memento from January 10, 2012 in the Internet Archive )
    83. ↑ buendnis-buergerwille.de
    84. ↑ handelsblatt.com
    85. ↑ Billions burned. Chancellor Hold a World Online, June 18, 2012. Retrieved June 19, 2012.
    86. ↑ Attac campaign against the fiscal pact triggers outrage. Spiegel Online, June 29, 2012, accessed September 6, 2012 .
    87. ↑ attac.de
    88. ↑ Media information from the Constitutional Court. (PDF; 77 kB) In English.
    89. ↑ The press: EUR Screen: The next problematic contract
    90. ↑ Netherlands: Resistance to the ESM is growing Deutsche MittelstandsNachrichten, article from May 23, 2012, accessed on June 17, 2012.
    91. ↑ Superschirm could become a billionaire grave , article in Wirtschaftswoche, accessed on June 17, 2012.
    92. ↑ Ireland: Member of Parliament sues ESM and Fiscal Pact Deutsche Wirtschaftsnachrichten, article from April 17, 2012, accessed on June 17, 2012.
    93. ↑ eurolitigation.eu
    94. ↑ Thomas Sigmund, Jan Hildebrand, Martin Greive: ESM: Surprising breakthrough: EU finance ministers agree on reform of the euro rescue package. Handelsblatt, December 1, 2020, accessed on July 1, 2021 .
    95. ↑ ESM reform. European Stability Mechanism, accessed July 1, 2021 .
    96. ↑ Yes to the reform of the European Stability Mechanism. German Bundestag, June 11, 2021, accessed on July 1, 2021 .
    97. ↑ Federal President Steinmeier temporarily suspends examination of the law amending the ESM Treaty. Office of the Federal President, July 1, 2021, accessed on July 1, 2021 .
    98. ↑ Manfred Schäfers: ESM law is delayed: Steinmeier suspends execution. Frankfurter Allgemeine Zeitung (FAZ), July 1, 2021, accessed on July 1, 2021 .