CYIL 2014

THE INTERGOVERNMENTAL AVENUES OF EUROPEAN INTEGRATION… institution based in Luxembourg and having full (international) legal personality. The purpose of the ESM was to mobilise funding and provide stability support under strict conditionality, appropriate to the financial assistance instrument chosen, to the benefit of ESM Members which were experiencing or came under threat of severe financing problems. That support was to be granted only if indispensable to safeguard the financial stability of the euro area as a whole and of its Member States. For that purpose, the ESM is entitled to raise funds by issuing financial instruments or by entering into financial or other agreements or arrangements with ESM Members, financial institutions or other third parties. 13 The maximum lending capacity was set initially at €500 billion. The strict conditionality, which refers back to the provision of Art. 136(3) TFEU and to which any financial support must be subject, may take the form of a macro-economic adjustment programme or the obligation to continuously respect pre-established eligibility conditions. The ESM Treaty entered into force on 27 September 2012. However, the entry into force was accompanied by the adoption of a joint declaration requested by Germany, which would satisfy the concerns expressed by the FCC in its interim judgement of 12 September 2012. 14 The joint declaration thus addressed the concerns in the following manner, effectively constituting a ‘binding’ interpretative instrument to which all parties gave their consent: “The representatives of the parties to the Treaty establishing the European Stability Mechanism (ESM) signed on 2 February 2012, meeting in Brussels on 27 September 2012, agree on the following interpretative declaration: ‘Article 8(5) of the Treaty Establishing the European Stability Mechanism (“the Treaty”) limits all payment liabilities of the ESM Members under the Treaty in the sense that no provision of the Treaty may be interpreted as leading to payment obligations higher than the portion of the authorised capital stock corresponding to each ESM Member, as specified in Annex II of the Treaty, without prior agreement of each Member’s representative and due regard to national procedures. Article 32(5), Article 34 and Article 35(1) of the Treaty do not prevent providing comprehensive information to the national parliaments, as foreseen by national regulation. The above mentioned elements constitute an essential basis for the consent of the contracting States to be bound by the provisions of the Treaty.” The above stated declaration apparently satisfied the concerns expressed by Germany as regards the limits of payments into ESM and the comprehensive information available to national parliaments and cleared the way to launch the ESM as a new financial institution, which became operational on 8 October 2012. Klaus Regling was appointed as the first Managing Director of the ESM, with approx. 130 staff members, authorised total capital stock of € 702 billion and maximum 13 Art. 3 (Purpose) of the ESM Treaty. 14 At the same time and probably just to be sure, the Federal Republic of Germany issued a unilateral declaration with the same content.

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