Finance ministers from the 27 EU Member States discussed the reform of the European Stability Mechanism (ESM) at a meeting of the Eurogroup on 1 October. The discussion was mandated by the Euro Summit meeting held in June of this year. The Eurogroup is expected to agree on a term sheet for the further development of the ESM by December 2018. The discussion focused on a review of the ESM toolkit – in particular the effectiveness of precautionary instruments and their eligibility criteria – and on the role of the ESM in crisis management and prevention. During a meeting in regular format of the 19 euro area countries, ministers exchanged views on how national policies could enhance automatic stabilisers and shared their national experiences in this regard. Well-functioning national automatic stabilisers, which include tax and benefit systems, are the first lines of defence when a country is experiencing an economic shock. They are particularly important for countries that belong to a monetary union, because they cannot rely on their own monetary and exchange rate policies to counteract shocks. Lastly, ministers took stock of recent exchange rate developments in preparation for upcoming G7, G20 and IMF meetings.