The reform of the European Stability Mechanism

This article seeks to explain the main aspects of the reform of the European Stability Mechanism, as agreed in principle by the leaders of the euro area member states. The article focuses particularly on the ESM’s new mandate to act as the common backstop to the Single Resolution Fund, the reform of its precautionary lending instrument, the expansion of its role in country monitoring both in and outside of programmes, and the future treatment of debt sustainability issues, including the adoption of a revised euro area model collective action clause. By shedding light on the nature and context of these developments, the authors hope to dispel some misunderstandings about the content of this reform and contribute to a clearer understanding of what is at stake.