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/martensamp/header.php on line 443
back

Publications

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.

ENJOYING THIS CONTENT

Stay up to date by joining our database !

Download the publication

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

Policy Briefs

The 7Ds

The 7Ds

Other

Policy Briefs

Policy Briefs

Ukraine

The 7Ds

You might also be interested by

Europe’s Competitiveness Compass is Pointing in the Right Direction – But it Overlooks the Workforce Crisis

Blog

04 Feb 2025

Friend or Foe? An Economic War With the U.S. Should Inspire Greater Canadian Autonomy

Blog

30 Jan 2025

It’s the Economy or Bust for Europe’s Centre Right in 2025

Blog

07 Jan 2025

On Revenants in Economic Policy: Taxing the Rich

Blog

31 Oct 2024

The Euro’s Weak Heart Threatens its Survival

Blog

17 Oct 2024

Trapped in an EU of Central Governments? The Future of EU Cross-Border Regions

Blog

28 Mar 2024

Brussels is About to Protect Citizens from Intelligence

Blog

13 Feb 2024

COP28: Between Greenwashing and Modest Progress

Blog

21 Dec 2023

20 Years of Neglect and Regret: Why Competitiveness Will Haunt Europe in the 2024 Elections

Blog

13 Dec 2023

Related events

14 November 2023

Hostile Actors and Migration: Responding to Weaponised Population Flows

Renaissance Hotel, Rue du Parnasse 19, 1050 Brussels

In-House Events

09 November 2023

Publication Launch: Middle-Class Concerns and European Challenges

ACE Events, Avenue d’Auderghem 22,1040 Brussels

In-House Events

Stay updated on Martens Centre Activities, Events and Publications

Copyright © 2025 | Martens Centre ALYS

Manage Cookie Consent
To provide the best experiences, we use technologies like cookies to store and/or access device information.
Functional Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
Manage options Manage services Manage {vendor_count} vendors Read more about these purposes
View preferences
{title} {title} {title}
Exit mobile version
To provide the best experiences, we use technologies like cookies to store and/or access device information.