The President of the European Council, Herman Van Rompuy, announced that European Union leaders agreed on the establishment of a future permanent mechanism to secure the financial stability of the euro zone.
The agreement regards the limited amendment to the Lisbon Treaty by adding two sentences to Article 136. Specifically:
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 and stating that the granting of any required financial assistance under the mechanism will be made subject to strict conditionality.
Such a decision may not increase the competences conferred on the Union and applies only to member states whose currency is the euro.
After an opinion of the European Parliament, the European Commission and the Central Bank, the European Council will turn the draft decision into a full decision, by March 2011 at the latest. Then the amendment will have to be approved in each member state.
“The aim is for the amendment to enter into force on 1 January 2013 at the latest, so that the permanent mechanism itself can be in place in June 2013”, Van Rompuy added.
Concerning the features of the stability mechanism, the President of the European Council said that it “will be designed on the basis of the current mechanism, so International Monetary Fund involvement is foreseen”.
As regards the role of the private sector, decisions will thus be taken on a case by case basis and private sector involvement will not be a prior requirement.
German Chancellor Angela Merkel said that private lenders will be included based on methods used by the International Monetary Fund, according to Dow Jones Newswires. “This would give markets a sense of predictability” she added.
Merkel said that the treaty change stipulates that the future stability mechanism is to be used only if the entire euro zone in danger. Countries that receive aid must undertake severe austerity measures to bring their public finances in order, she concluded, according to Dow Jones.
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