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European Financial Stabilisation Mechanism (EFSM)

This mechanism provides financial assistance to all EU Member States in financial difficulties. EFSM has been activated for Ireland and Portugal in the context of assistance programmes.

The European Financial Stabilisation Mechanism (EFSM) essentially reproduces for the EU 28 the basic mechanics of the existing Balance of Payments Regulation for non-euro area Member States. Through the EFSM, the Commission is allowed to borrow up to a total of € 60 billion in financial markets on behalf of the Union under an implicit EU budget guarantee. The Commission then lends the proceeds on to the beneficiary Member State. This particular lending arrangement implies that there is no debt-servicing cost for the Union. All interest and loan principal is repaid by the beneficiary Member State via the Commission. The EU budget guarantees the repayment of the bonds case of default by the borrower.

The EFSM was activated for Ireland and Portugal, for a total amount of € 46.8 billion (€ 22.5 billion for Ireland and € 24.3 billion for Portugal), disbursed over 3 years (2011 – 2014). Loan disbursements to both countries were concluded in 2014.

In July 2015, EFSM has been used to provide short-term assistance (bridge loan) of € 7.16 billion to Greece. The loan was fully repaid by Greece on 20 August 2015.

The EFSM is part of a wider safety net. Alongside the EFSM, European support was provided through the European Financial Stability Facility (EFSF), i.e., funds guaranteed by the euro area Member States, in addition, funding from the International Monetary Fund (IMF) has been made available for euro area Member States.

Since 2013, EU member states whose currency is the Euro and which may need financial assistance can turn to the European Stability Mechanism (ESM), the new permanent European Institution in charge of this. The EFSM programme (managed by the European Commission) remains in place for specific tasks (lengthening of maturities for loans to Ireland and Portugal, bridge loan). The EFSF (managed by the ESM team) does not accept new country programmes, but will remain active in order to finance existing loans.

See also:

Activation of EFSM: Programmes for Ireland and Portugal

The European Commission is empowered to borrow on behalf of the European Union for the purpose of funding loans made under the EFSM (Article 2 of Council Regulation 407/2010) contributing the overall loan packages for Ireland and Portugal, which are co-funded by the EU, the EFSF, and the IMF, each acting independently but in a coordinated way.

Under the EFSM, the borrower is the European Union. The EU enjoys an AAA credit rating from the major rating agencies. The Commission is the institution that manages the borrowing on behalf of the EU.

See also:

>>see: Details on transactions, including charts on investor distribution 

Legal base

Council Regulation (EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation mechanism.pdf


The EFSM provides assistance to Member States where:

  • a Member State is experiencing, or is seriously threatened with, a severe financial disturbance;
  • the financial disturbance or threat of financial disturbance is due to events beyond the control of the Member State concerned.

Financial assistance

Financial assistance by the EFSM may take the form of a loan or credit line granted to Member States. A credit line is an authorisation given to a Member State to draw funds up to a specified ceiling for a given period of time.


Before it can benefit from the EFSM, a Member State shall submit a request comprising:

  • an assessment of its financial needs;
  • an economic and financial adjustment programme describing the various measures to be taken to restore financial stability.

The Council then decides whether to grant financial assistance to the Member State. It shall act by a qualified majority on a proposal from the Commission. If the Council decides to grant financial assistance to the Member State, its decision contains:

  • the procedures for the financial assistance, such as the amount, the number of payments, the availability period of the financial assistance, etc.;
  • the general economic policy conditions: these conditions are established by the Commission. They are attached to the EU financial assistance with a view to re-establishing a sound economic situation in the Member State concerned and to restoring its capacity to finance itself on the financial markets;
  • the economic and financial adjustment programme of the Member State.

Moreover, the general economic policy conditions are the subject of a Memorandum of Understanding between the Member State and the Commission. The Commission then re-examines compliance with these conditions regularly in collaboration with the European Central Bank. Any changes to these conditions may result in an adjustment of the economic and financial adjustment programme of the Member State.

Granting of financial assistance

The disbursement of loans or the opening of credit lines granted to Member States is managed by the Commission. The latter then verifies at regular intervals whether the economic policy of the beneficiary Member State accords with its adjustment programme.

The Commission is also authorised to borrow on the capital markets or from financial institutions in order to finance the loans granted to Member States.

Moreover, the Court of Auditors has the right to carry out financial controls and audits in order to verify the legality of financial assistance granted by the EU.

Compatibility with other mechanisms providing financial assistance

The EFSM is compatible with the facility providing medium-term financial assistance for balances of payments. This financial assistance is for Member States which have not adopted the euro and are experiencing difficulties in their balance of payments.

The EFSM is compatible with the facility providing medium-term financial assistance for balances of payments. This financial assistance is for Member States which have not adopted the euro and are experiencing difficulties in their balance of payments. The EFSM also does not exclude recourse to financing from outside the EU, in particular by the International Monetary Fund. In that case the Commission examines whether the EFSM is compatible with the outside financing.

Review of the EFSM

Six months after the entry into force of this Regulation, the Commission had to review whether the exceptional circumstances which justified the establishment of the EFSM remain. This report (COM(2010) 713 final ) was published on 30.11.2010. It concluded that the exceptional events and circumstances still exist and the EFSM should therefore continue.


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