European Stability Mechanism : one more insufficient step in the right direction

It’s with bitter-sweet satisfaction that the European liberals and democrats welcome the compromise made on the European Stability Mechanism (ESM) which should be formally recognised during the European Summit on March 24th and 25th via a modification of article 136 of the Treaty. This mechanism will allow the current European Financial Stabilisation Fund to expand and become sustainable, but the terms of its implementation may not be enough to reassure the markets during a future emergency.

Guy VERHOFSTADT, ALDE group president said: “After more than a year of struggle to equip the EU with a durable instrument to resolve the bond crisis which has hit several eurozone countries, I’m not going to complain. We will have a mechanism with 700 billion euros which can lend at the best rates under strict conditions to eurozone countries in difficulty. Nevertheless, I still have serious doubts as to the efficiency of this mechanism, the functioning of which could prove to be very problematic. Every time that money is to be released, every Member State’s Parliament will have to give their green light. Notwithstanding the slowness of the procedure, it is very risky and will mean that any bailout for a country will be contingent on the internal politics of another country”.

Andrew DUFF (LibDem, UK), ALDE spokesperson for the Constitutional Affairs Committee, added: “The compromise that we’ve concluded with the Council was a first indispensible step. The Parliament has managed to get the system’s operational mechanism to be activated via an EU regulation instead of a system where the European Commission would be only a spectator and not an actor in the decisions; this would have been neither satisfactory, nor viable.

Alexander LAMBSDORFF (FDP, Germany) concluded: “The ESM is an important step towards consolidation of the Eurozone. Now, Europe needs to clean up its banking sector while the member states who have asked for help must do everything to enhance their competitiveness and bring their fiscal houses in order. Once this crisis is over, the ESM should be turned into a real European Monetary Fund.”