EU Ambassadors Sign ESM Treaty

EU ambassadors from the member states that are part of the European Stability Mechanism (ESM) have this morning signed the ESM Treaty and the Single Resolution Fund Intergovernmental Agreement. The treaty and agreement will now go onto eurozone member state parliaments for ratification.

• Eurogroup President Paschal Donohoe (Ireland-EPP)issued a statementfollowing the signing. Below are some select comments:
  • "On 30 November 2020, the Eurogroup reached a political agreement in relation to the ESM reform package. The agreement will make the ESM more effective and flexible."
  • "This includes the ESM providing a common backstop to the Single Resolution Fund by means of a credit line as of the beginning of 2022, two years ahead of schedule."
  • "The common backstop will help to ensure that a bank failure does not harm the broader economy or cause financial instability. It will be financed by contributions from the banking sector and not by taxpayers' money, thereby reducing the link between banks and sovereigns in the Banking Union."
• ESM reform had previously threatened the stability of the Italian gov't in late-2020 at the time of the negotiations. The collapse of the Italian gov't yesterday was due to an unrelated issue.