“This feels like something really significant because it’s reopening the treaty,” said one official. The transformation will leave it looking more like a European version of the International Monetary Fund with a vastly expanded mandate. Later this year, the Luxembourg-based institution will take on new responsibilities linked to bank resolution and economic monitoring. The 10-year anniversary of the ESM’s conception also coincides with a big change in its remit. While Spain is due to pay back the €40bn it borrowed before the end of the decade, the €200bn lent to Greece in three rescue deals isn't due to be paid off until 2070. Its job is to continue financing the €260bn still owed by the five countries that were bailed out. A decade on, it still bears the scars of the European sovereign debt crisis. Both agreed that a new, permanent rescue vehicle would be needed.Īnd so the European Stability Mechanism was born. In their haste to push through the Greek rescue and avoid painful treaty renegotiations, the European Financial Stability Facility – the body charged with funding any bailouts – had been set up to automatically expire after two years. ![]() The French and German leaders realised they were unprepared for a big flare-up. Fear was rife that it was the beginning of a crisis that would drag in much bigger countries and maybe even bring down the euro. Greece was just five months into its first bailout, and Ireland was days from becoming the second country to seek help. When Nicolas Sarkozy and Angela Merkel met for a weekend summit at the French seaside resort of Deauville in October 2010, Europe was in deep crisis.
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