Treaty Establishing the European Stability Mechanism

ESM Treaty

Treaty Establishing the European Stability Mechanism
ESM member states   Other EU member states
Type	Intergovernmental agreement
Signed	2 February 2012 (2012-02-02)
Location	Brussels
Effective	27 September 2012 (2012-09-27)
Condition	Ratification by signatories whose initial subscriptions represent no less than 90% of the total
Parties	All Member States of the eurozone (19)
Depositary	General Secretariat of the Council of the European Union
Languages	Dutch, English, Estonian, Finnish, French, German, Greek, Irish, Italian, Maltese, Portuguese, Slovak, Slovenian, Spanish and Swedish

TFEU Article 136 amendment

Treaty on the Functioning of the European Union Article 136 amendment
Signed	25 March 2011 (2011-03-25)
Location	Brussels
Effective	1 May 2013 (2013-05-01)
Condition	Ratification by all European Union member states
Parties	All Member States of the European Union (27)
Depositary	General Secretariat of the Council of the European Union

The Treaty Establishing the European Stability Mechanism was signed by the member states of the eurozone to found the European Stability Mechanism (ESM), an international organisation located in Luxembourg, to act as a permanent source of financial assistance for member states in financial difficulty, with a maximum lending capacity of €500 billion. It replaced two earlier temporary EU funding programmes: the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM). All new bailouts of eurozone member states will be covered by ESM, while the EFSF and EFSM will continue to handle money transfers and program monitoring for bailouts previously approved for Ireland, Portugal and Greece.

The treaty stipulated that the organization would be established if member states representing 90% of its original capital requirements ratified the founding treaty. This threshold was surpassed with Germany's ratification on 27 September 2012, bringing the treaty into force on that date for the sixteen states which had ratified the agreement. The ESM commenced its operations at a meeting on 8 October 2012. A separate treaty, amending Article 136 of the Treaty on the Functioning of the European Union (TFEU) to authorize the establishment of the ESM under EU law, was planned to enter into force on 1 January 2013. However, the last of the 27 European Union member states to ratify the amendment, the Czech Republic, did not do so until 23 April 2013, resulting in its entry into force on 1 May 2013. In June 2015, an updated EMU reform plan was released which envisaged that in the medium-term (between July 2017 and 2025) the ESM should be transposed from being an intergovernmental agreement to become fully integrated into the EU law framework applying to all eurozone member states, so that the ESM can be governed more smoothly by the EU institutions - under the competence provided for by the amended article 136 of the TFEU.