European Stability Mechanism Agreement

27 See generally Francois Gianviti et al., A European Mechanism for Sovereign Debt Crisis Resolution: A Proposal, Bruegel Blueprint (November 9, 2010), aei.pitt.edu/15123/1/101109_BP_Debt_resolution_BP_clean_01.pdf. The European mechanism would have been based on two pillars: first, a procedure – managed by the European Court of Justice – to negotiate between an unsustainable indebted public borrower and its private creditors, with the aim of reaching an agreed solution to make the debt viable; second, a financial support mechanism for insolvent countries against an agreement between debtors and creditors capable of restoring the borrower`s creditworthiness. In substance, the Commission`s proposal contained important innovations in relation to the ESM treaty. Firstly, the EDF would contribute to the maintenance of the financial stability of the euro area and the financial stability of the participating Member States, whereas in this esm treaty, only interventions are essential to maintaining the financial stability of the euro area as a whole and its Member States. Removing the reference to the euro area as a whole would allow intervention if there is no systemic crisis endangering the entire euro area, but in the face of a crisis affecting a euro area country. Second, the EDF would be responsible to the European Parliament and the Council for the fulfilment of its tasks. In this context, the EDF should submit an annual report on its activities to the Commission, the Council and the European Parliament. In addition, the European Parliament could ask questions of the Director General of the EMF, who would be required to answer orally or in writing. Following the integration of the ESM into the EU legal order, the EDF`s actions must be in line with the EU treaties and the EU Charter of Fundamental Rights and could be appealed to the Court of Justice. Third, the EDF would work in two ways in favour of the banking system: a direct recapitalisation of credit institutions and lines of credit or guarantees for the Single Resolution Board (SRB). Footnote 30 Assistance to credit institutions would be granted if an EMS Member State faced serious difficulties with its banking sector, which could not be cured without significantly compromising its viability, given that there is a risk of banks contagion to states or alternative routes would compromise market access. Footnote 31 Assistance to the SRB would be granted jointly with the participating states, i.e.

non-euro area countries that have decided to establish close cooperation with the ECB in the area of financial institution supervision.