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Luxembourg's Deputies Back ESM Participation

by Ulrika Lomas,, Brussels

02 July 2012

Luxembourg’s Chamber of Deputies has recently voted by a large majority in favour of Luxembourg’s participation in the permanent euro rescue mechanism, the European Stability Mechanism (ESM).

According to the Luxembourg finance ministry, in order to implement the ESM in Luxembourg, the adoption of three different bills was necessary:

  • Bill number 6334 modifies the Treaty on the Functioning of the European Union (EU) by adding to article 136 a third paragraph enabling eurozone member states to institute a permanent financial support mechanism, or ESM.
  • Bill number 6405 approves the treaty instituting the European Stability Mechanism, signed in Brussels on February 2, 2012. The ESM is due to replace the existing accord pertaining to the European Financial Stability Fund (EFSF) as well as the European Financial Stability Mechanism (EFSM), conceived as a dual mechanism back in 2010 to guarantee the stability of the eurozone, for a limited period of three years. The mechanisms are due to apply until June 2013.
  • Bill number 6406 relates to Luxembourg’s participation in the ESM.

The first text was adopted by Luxembourg’s governing council on September 1, 2011, while the other two texts were approved on July 29, 2011.

The ESM is an intergovernmental instrument, which is intended to mobilize financial resources and to provide, under strict conditions, support to the stability of eurozone member states in severe financial difficulty, if this is vital for preserving the financial stability of the eurozone as a whole.

To this end, the capital structure is authorized to raise funds by issuing financial instruments or by concluding agreements or financial arrangements or other agreements or arrangements with its members, financial institutions or other third parties.

All eurozone member states are members of the ESM and any state acceding to the eurozone may become a member of the ESM.

Luxembourg’s participation in the ESM capital is around EUR1.753bn (USD2.18bn).

TAGS: economics | fiscal policy | international financial centres (IFC) | Luxembourg | offshore | agreements | legislation | currency

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