Martens Centre
  • Home
  • About
    • Who we are
    • Team
    • Bodies and Experts
    • Members
  • Publications
  • Events
  • News
  • Blog
  • Contact

Warning: Undefined variable $lock in /home/clients/0aee7ac7fc8ad72a3a23bcc4ca043604/web-martenscenter.eu/wp-content/themes/martenscentre/header.php on line 459
back

Publications

  • Home
  • About
    • Who we are
    • Team
    • Bodies and Experts
    • Members
  • Publications
  • Events
  • News
  • Blog
  • Contact
Share this...
  • Facebook
  • Twitter
  • Linkedin
  • Email

Reforming the European Stability Mechanism: Too Much but Never Enough

19 July 2021

On 27 January 2021 the member governments of the European Stability Mechanism (ESM) signed the Agreement Amending the ESM Treaty, instituting long-awaited reforms to the EU’s crisis management and financial-aid mechanism. The ESM was never perfect. Set up outside the EU treaty framework, it suffered from acute accountability and legitimacy issues and, being directly controlled by eurozone governments, its procedures were subject to cumbersome voting arrangements and conflicts of interest. Finally, with its inception in the throes of the eurozone crisis, it was committed to a single rigid approach based on conditionality.

The European Commission’s attempt to address these shortcomings in December 2017 was categorically rejected by the member states, who instead embarked on a separate reform initiative resulting in the current ESM Reform Treaty. This turn of events has been in part motivated by troubling levels of distrust between EU institutions and member states, and—as a result—between EU institutions and the ESM. The other driving force has been the political refusal to let go of the Maastricht promise of national fiscal sovereignty without shared liabilities. Thus, the ESM Reform Treaty is the culmination of a political campaign to redeem the economic compromise at the core of the Economic and Monetary Union and create an alternative arrangement for member states to avoid surrendering further competences to the EU.

This paper finds that the ESM Reform Treaty not only fails to address the outstanding issues in the original ESM framework, but exacerbates the status quo by further empowering the Mechanism outside the legal framework of the EU treaties. The ESM’s ‘peacetime powers’ represent a consequential novelty in this regard. These ‘powers’ are in fact the ESM’s own analytical capabilities, which have been extended beyond its financial-aid function and are now applicable within the bounds of the European Semester for economic governance. Perhaps worst of all, the ESM remains an extremely limited instrument, legally designed to imagine the single scenario of a sovereign debt crisis which requires disciplinary conditionality in exchange for financial aid. It would be careless to insist on this approach for resolving the multitude of difficulties which might befall the eurozone in the future.

Future reforms are not just advisable, they are a functional necessity. It will become increasingly difficult for the ESM to exercise its new powers or provide suitable crisis management without the efficiency and legitimacy which these adjustments could confer.

A compromise solution could see the ESM become its own independent technocratic institution, equally removed from the political influence of governments and the reach of the Commission. Introducing flexibility in its strict conditionality could be a matter of reinterpreting the meaning of ‘sound budgetary policy’ from the Court of Justice of the European Union’s ruling in Pringle. Lastly, in matters of justiciability and the protection of fundamental rights, nothing prevents ESM governments from committing the activities of the Mechanism to the European Charter on Fundamental Rights or the authority of the European courts, should they wish to do so.

Whatever decisions may be taken on the future of the ESM, they cannot ignore the unfolding of the EU’s fiscal response to the pandemic with Next Generation EU. Should the facility remain an exception, there would be even more pressure on the ESM to undergo another round of far-reaching reforms. However, should Next Generation EU prove a positive exercise, the EU should look to capitalise on the newfound trust by consolidating its economic and crisis governance capacities under a single flag—a certain blue one with 12 gold stars.

Download the publication

See the publication in a flipbook

Reforming the European Stability Mechanism: Too Much but Never Enough

Research Papers

Anna Peychev

Edited by

Eoin Drea

Research Team

  • Crisis
  • Economy
  • Eurozone

Related publications

  • Cross-Border Movements Compared: Migration from and to Ukraine in Historical Comparison with Other Conflict-Induced Situations 

    Ukraine

    Cross-Border Movements Compared: Migration from and to Ukraine in Historical Comparison with Other Conflict-Induced Situations 

  • Mistaking the Wood for the Trees: Five Ways the EU can Deliver a more Competitive Industrial Policy

    IN BRIEF

    Mistaking the Wood for the Trees: Five Ways the EU can Deliver a more Competitive Industrial Policy

  • Up, Up and Away? A Price Stability Guide for Policymakers

    IN FOCUS

    Up, Up and Away? A Price Stability Guide for Policymakers

  • Re-new EU — Recovery, Reopening and Revival

    Collaborative

    Re-new EU — Recovery, Reopening and Revival

  • Beyond the Headlines: The Real Impact of Western Sanctions on Russia

    Other

    Beyond the Headlines: The Real Impact of Western Sanctions on Russia

  • The Long View: A Centre Right Response to the Economic Fallout of War in Ukraine

    Ukraine

    The Long View: A Centre Right Response to the Economic Fallout of War in Ukraine

  • GDP, not the Bond Yield, should Remain the Anchor of the EU Fiscal Framework

    IN FOCUS

    GDP, not the Bond Yield, should Remain the Anchor of the EU Fiscal Framework

  • Regulating the Digital Future: A Centre–Right Approach to Crypto Assets and Digital Currencies

    Policy Briefs

    Regulating the Digital Future: A Centre–Right Approach to Crypto Assets and Digital Currencies

You might also be interested by

  • Thinking Talks Ep.9 – ‘The Spectre of a new Banking Crisis’ with MEP Luděk Niedermayer

    Multimedia - Thinking Talks

    31 Mar 2023

  • The Windsor Framework Shows that Germany is Key to a British Recovery

    Blog

    03 Mar 2023

  • EU-Central Asia: An Underdeveloped Relationship

    Blog

    15 Dec 2022

  • Brussels Bytes

    The Digital Markets Act with Andreas Schwab, MEP

    Brussels Bytes - Multimedia

    08 Dec 2022

  • Fixing Gas Prices Won’t Solve the EU’s Energy Crisis

    Blog

    18 Oct 2022

  • Migration Update September 2022

    Migration Update

    30 Sep 2022

  • Easy Money has Warped the Economics of Power

    Blog

    28 Sep 2022

  • From Claiming a Global Role for the EU to Defending it – State of the Union 2022

    Blog

    15 Sep 2022

  • After the Easy Money Comes the Hard Political Reality

    Blog

    12 Jul 2022

  • Migration Update June 2022

    Migration Update

    30 Jun 2022

Related events

    • 29 - 30 November 2022

      European Ideas Forum 2022

      European Ideas Forum 2022 2023-03-31

      Brussels

      In-House Events

Stay updated on Martens Centre Activities, Events and Publications

  • Navigate

    • Home
    • About
      • Who we are
      • Team
      • Bodies and Experts
      • Members
    • Publications
    • Events
    • News
    • Blog
    • Contact
  • More

    • A word from Wilfried Martens
    • European People’s Party
    • Join the team
    • Privacy Policy, Cookie policy & Legal
  • Contact us

    0032 (0)2 300 80 04
    20 Rue du Commerce
    1000 Brussels, Belgium

Copyright © 2023 | Martens Centre ALYS

This website uses cookies to improve your experience, click here for more info. ACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
SAVE & ACCEPT
Go to mobile version