Established in 2010, then in 2012, in the wake of the crisis, this institution will strengthen its powers and can come to the rescue of the Union’s banking rescue fund in case of severe shake.
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It was a decade ago. The 2008 financial crisis had gradually changed into the sovereign crisis in the euro area. The European Union (EU) discovered at the mercy of the financial markets, divided and unable to react. “Europe believed that this type of crisis would not happen, and it was not ready,” explains Nicola Giamaroli. Today, Italian is Secretary General of the European Stability Mechanism (MES).
This unknown institution in France, located in Luxembourg, is the equivalent of a fire station in the euro area, created in several stages. First in the precipitation, from June 2010, then more systematic since October 2012. Today, in the event of a financial crisis in one of the member countries of the single currency, it is ready to mobilize quickly until 410 billion euros to extinguish the fire (it has 80 billion euros of own funds, and the rest can be borrowed in the markets).
Thursday, October 28, the MES will move an extra step. The French Senate must debate at first reading the addition of a new prerogative to this institution, concerning this time the consequences of a possible banking panic. In the event of bankruptcy of a bank, the euro zone has set up, since 2016, the Single Resolution Fund (Fru), funded by the banks themselves, which currently has 52 billion euros. If necessary, this one can come to the rescue of an establishment. “But there may be a situation, during a serious crisis, where the rescue of several banks would be necessary, and where this fund would be insufficient,” says Giammarioli. To avoid this scenario, the my can potentially fly to the rescue of the Fru if the money was missing.
Five states supported
The principle decision of this additional power was taken at the end of 2020 by the ministers of the euro area economy, but it requires ratification by all member countries. The process, in France, should be completed in November: after the passage of the text to the Senate, it will be the turn of the National Assembly. The decision, technical, should be voted without obstacles. “Seven countries have already ratified, and we do not expect a major problem in the other Member States, believes Mr. Giammarioli. Full ratification should be completed by the end of the year.”
In pain, taking his time, the single currency will have managed to put in place very important safety nets, in order to avoid a new existential crisis. With a paradox: “More Europe is strong, the less the MES will need to be activated, explains the Secretary General. But we do not delete a fire station because there is no fire.” / p>
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