how it works, what is the ratification -

how it works, what is the ratification -

The Mes was created in 2012 to replace the temporary State-saving fund created two years earlier to deal with the sovereign debt crisis, here's how it evolved.

What is the Mes?
The European Stability Mechanism (MES) was created in 2012 to replace the temporary State-saving fund created two years earlier to deal with the sovereign debt crisis. was established with an intergovernmental treaty by the 19 countries that have adopted the single currency. Now Croatia has also been added, so the shareholder countries have become 20. Objective: to provide financial assistance to the countries of the Eurozone in difficulty. a bailout fund and has been used in the past to help Ireland, Portugal, Greece, Spain and Cyprus. The aid was offered on the basis of strict political conditionality in the context of a macroeconomic adjustment program and an analysis of the sustainability of the public debt carried out by the Commission with the IMF and in consultation with the European Central Bank.

Why is the ratification of the new Mes treaty needed?
In 2018 the EU leader decided to expand the competences of the Mes. After years of negotiations, an agreement was reached. On 27 January 2021, the representatives of the member states signed the agreements amending the treaty. The signing started the ratification procedures. For the new functions to enter into force, it is necessary for all countries to ratify it. Italy is the only one that hasn't done it yet. Ratifying the treaty does not mean using the Mes.

What is the reform of the Mes?
The reform also attributes the function of final parachute to the Mes (backstop) of the single bank resolution fund: a 70 billion credit line that countries will be able to access if their national funds for bank resolution (bank and non-public resources) are not sufficient. This is to allow for an orderly bankruptcy (keeping customers active) in the event of a banking crisis. This is an essential building block for the completion of the Banking Union, which involves risk sharing and protects households and businesses. The money made available by the Mes will be repaid by the single resolution fund.

What changes in the role of bailout fund?
The Mes will be able to mediate between states and private investors if the restructuring of a public debt is necessary. But there is no automatism between requests for financial assistance
and debt restructuring. The reform also simplifies access to precautionary credit lines.

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