European Stabiliation Actions provide financial assistance which is capable of supporting EU Member States in difficulty and thereby preserving the financial stability of the EU.

The financial crisis that hit the global economy at the end of 2008 has had several harmful consequences for Member States’ economies:

• the destabilisation of financial markets;
• the downturn in economic growth;
• the deterioration in the budget deficits and debt positions of the Member States.

The financial difficulties experienced by a Member State may present a serious threat to the financial stability of the European Union as a whole. It was therefore necessary to establish a package of  European Stabilisation Actions providing financial assistance which is capable of supporting Member States in difficulty and thereby preserving the financial stability of the EU.

European Stabilisation Actions: a safety-net up to EUR 750 billion

In May 2010, the European Union and euro-area Member States set up the European Stabilisation Mechanism that consists of

• the European Financial Stabilisation Mechanism (EFSM); and
• the European Financial Stability Facility (EFSF).

to safeguard EU financial stability amid severe tensions in euro-area sovereign debt markets.
Alongside the EFSM and the EFSF,

• funding from the International Monetary Fund (IMF); and
• possible ECB (European Central Bank) purchases of sovereign debt.

are available forming a safety-net of up to EUR 750 billion, addressing the current exceptional circumstances.

Fiscal and economic measures

The financial support is accompanied by fiscal and economic measures. There is a comprehensive strategy to ensure fiscal coordination, surveillance and consolidation, and economic reforms aimed at reducing the differences in competitiveness among EMU Member States through:

Improvement of economic policy coordination:

• The heads of government of the EAMS established the Van Rompuy Task Force.
• Strengthening the stability and growth pact.
• Strengthening surveillance of macro-economic imbalances (competitiveness).
• Developing a permanent crisis resolution mechanism.

Legislation on measures to improve financial oversight:

• A “European Systemic Risk Board” will be set up to monitor high-level risks to the EU’s financial system.
• Three supervisory authorities will be created to oversee banking, insurance, and securities markets

>> see: Reinforcing economic policy coordination in the EU and the euro area
>> see: A new EU economic governance - a comprehensive Commission package of proposals

From 2013 onwards: European Stability Mechanism (ESM)

A new permanent crisis mechanism, the European Stability Mechanism (ESM), will be set up in the euro area as of mid-2013. Its main features will build on the existing European Financial Stability Facility (EFSF). The ESM will complement the new framework for reinforced economic surveillance in the EU. This new framework, which includes in particular a stronger focus on debt sustainability and more effective enforcement measures, focuses on prevention and will substantially reduce the probability of a crisis emerging in the future. An overall evaluation of the new mechanism will be performed by the Commission, in liaison with the ECB, in 2016.