Euro area finance ministers failed, on Thursday 16 June in Luxembourg, to agree on the identity of Klaus Regling’s successor as head of the European Stability Mechanism (ESM), the euro area’s permanent rescue fund.
None of the three remaining candidates - Italy’s Marco Buti, Luxembourg’s Pierre Gramegna and Portugal’s João Leão - could gather a qualified majority for their candidacy, so the ministers, during a meeting of the ESM Board of Directors, did not hold a new vote to try to decide between them.
At the end of May, Mr Buti came third in a vote in the Eurogroup (see EUROPE 12959/11). With little support for the Italian candidacy, it could serve as a trial run for Italy to occupy another important position at European level.
To be appointed, a candidate must receive more than 80% of the votes within the ESM Board, with each euro area country holding a weighted vote according to its share in the capital of the rescue fund. Germany and France, which both have veto power, support different candidates, respectively Mr Gramegna and Mr Leão, both former finance ministers.
The Eurogroup will meet again on Monday 11 July in Brussels for a new attempt, as Mr Regling’s mandate ends at the beginning of October.
Activity report. On Thursday, celebrating ten years of activity, the Luxembourg-based international financial organisation, ESM, adopted its annual activity report and financial statements, which show a net income of €311 million allocated to the fund’s reserves.
“Today the ESM is at a critical moment of its history, ready to assume new tasks which will deepen its role in crisis prevention”, Eurogroup President Paschal Donohoe said in a statement.
Approved at the end of 2020 (see EUROPE 12613/4), the reform of the ESM has still not been ratified by the nineteen members, with Germany and Italy missing. In Germany, a dispute is being heard by the Constitutional Court in Karlsruhe, while in Italy there is no political majority to ratify a reform that critics say would be detrimental to Italian interests.
The reform foresees the rescue fund playing a greater role in macroeconomic crisis management in the euro area and becoming the lender of last resort of the Single Resolution Fund (SRF), the financial arm of the resolution component within the Banking Union.
In the face of the current macroeconomic uncertainties, the ESM remains ready to provide assistance “in line with (its) mandate to safeguard financial stability in the euro area”, said Mr Regling. However, no euro area country wanted to activate the specific credit line created at the outbreak of the Covid-19 pandemic.
Since 2012, the ESM has financed the bailout of five euro area countries - Greece, Ireland, Portugal, Spain and Cyprus - with €300 billion in loans provided at preferential rates in exchange for structural reforms that are sometimes controversial for their social impact.
On Thursday, the Eurogroup decided that Greece would no longer be subject to close post-bailout surveillance.
The European Stability Mechanism will eventually become part of European Union law.
See the ESM’s annual report: https://aeur.eu/f/25z (Original version in French by Mathieu Bion)