The creation of the European Stability Mechanism (ESM)

The decision leading to the creation of the ESM was taken by the European Council in December 2010. The euro area Member States signed an intergovernmental treaty establishing the ESM on 2 February 2012. The ESM was inaugurated on 8 October 2012.

The European Stability Mechanism (ESM) is an important component of the comprehensive EU strategy designed to safeguard financial stability within the euro area. Like its predecessor – the temporary European Financial Stability Facility (EFSF) set up in 2010 – the ESM provides financial assistance to euro area Member States experiencing or threatened by financing difficulties. The two institutions functioned concurrently until mid 2013 after which, the EFSF doesn’t enter into any new programmes but continues the management and repayment of any outstanding debt (the ongoing lending programmes for Ireland, Portugal and Greece will remain with the EFSF). The ESM has begun funding the Cyprus programme in May 2013.

The ESM is the sole and permanent mechanism for responding to new requests for financial assistance by euro area Member States. To fulfil its purpose, the ESM raises funds by issuing money market instruments as well as medium and long-term debt with maturities of up to 30 years.

Read more about financial assistance in EU Member States.