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European Stability Mechanism 2015 annual report approved

Xinhua, June 17, 2016 Adjust font size:

The Board of Governors of the European Stability Mechanism (ESM) on Thursday approved their 2015 annual report during its fourth annual meeting.

According to the report, countries which have received financial assistance from the European Financial Stability Facility (EFSF) or ESM continued to make progress in their economic recovery in the last year.

The EFSF, created as a temporary crisis resolution mechanism in June 2010, has provided financial assistance to Ireland, Portugal and Greece. The final EFSF assistance program (for Greece) expired on June 30, 2015. Therefore, the EFSF will not provide any further financial assistance though it will continue to operate, the report said.

Cyprus became the fourth country to successfully conclude its financial assistance program in March 2016. Greece is expected to return to economic growth in the second half of 2016, the report said.

"Thanks to ESM/EFSF financial assistance and far-reaching reform measures, all five program countries have improved their economic fundamentals," Jeroen Dijsselbloem, chairman of the ESM Board of Governors, said.

"The ESM has established itself as a mature institution that has become indispensable for the financial stability of the euro area," he added.

"The past year has confirmed that our strategy of providing loans in exchange for reforms is working well," ESM managing director Klaus Regling said.

"All program countries have benefited from the extremely low interest rates and long maturities of ESM and EFSF lending. Our five beneficiary countries saved a total of 12.4 billion euros (13.8 billion U.S. dollars) in debt service payments in 2015, compared to the assumed market cost of funding. Greece alone saved 8.1 billion euros last year, the equivalent of 4.6 percent of the country's GDP," he said.

"If Greece implements the agreed reforms, the country can also regain market access and achieve sustainable growth," Regling said.

On the same day, the ESM Board of Governors also approved the supplemental memorandum of understanding (MoU) for Greece.

The supplemental MoU contains reforms to be implemented and the agreed contingency mechanism with potential budgetary measures.

According to the annual report, the ESM's net result of 729.4 million euros was allocated to its Reserve Fund, which serves as a buffer in case of potential losses. As a result, the reserve fund now holds 1.4 billon euros.

The Board of Governors comprises the finance ministers from 19 euro area countries.

The permanent rescue mechanism of the single currency bloc, the ESM started operations in October 2012, and is currently the sole mechanism for responding to new requests for financial assistance by Eurozone countries.

Currently, the ESM has a remaining lending capacity of 372 billion euros, which allows it to fulfill its mandate of safeguarding the financial stability of the euro area as a whole and of its member states. Enditem