On this page, we look at the proposed amendment to Article 136 of the TFEU, agreed by the EU Heads of Government so as to allow for the establishment of the ESM.
The euro currency is managed and operated under rules set out in EU Treaties. The Treaties say that the Union shall not be liable for or assume the commitments of Member States. The Treaties also say that Member States shall not be liable for or assume the commitments of other Member States [Article 125 TFEU].
There is an exception to these rules. This says that in exceptional circumstances beyond a Member State’s control, Union financial assistance can be given to that State but only for a temporary period [Article 122 TFEU]. This exception was used to permit Union support for the current temporary financial assistance arrangements (EFSM and EFSF). The use of Article 122 in this way has been a matter of controversy.
The Heads of Government of the Member States decided in March 2011 to establish a permanent financial assistance arrangement for all of the Eurozone countries. In order to do this, they agreed to amend the Treaties by adding a paragraph to Article 136 of the TFEU. This amendment which is not yet in force says:
“The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.”
This amendment will come into force a month after it has been ratified by all of the Member States or on the 1st January 2013, whichever is the later date. So the earliest date on which the amendment can come into effect is the 1st January 2013. Ireland has not yet ratified it. The Government intends to ratify it through legislation.