Minister Donohoe welcomes Klaus Regling to Dublin

8th May, 2018

The Minister for Finance and Public Expenditure and Reform, Paschal DonohoeTD, met with Klaus Regling, Managing Director of the European Stability Mechanism (ESM) today (Tuesday). The two discussed the successes of the Irish economy after the crisis, and the economic situation in the wider euro area. They agreed on the need to continue to strengthen the monetary union, and reviewed the possible development of the ESM in that context.

Speaking about the meeting, Minister Donohoe said: ‘The creation of the European Stability Mechanism (ESM) was one of the key euro area reforms after the crisis. It has quickly established itself as a very effective and important institution. Four of the five countries that received EFSF or ESM loans have now successfully ended their programmes, and have among the highest growth rates in the euro area’. 

Together with all other euro area Member States, Ireland is a member of the ESM. As part of the EU-IMF Programme of Financial Assistance, Ireland was also a beneficiary of its predecessor, the European Financial Stability Facility. Officials from the ESM therefore continue to visit Ireland on a twice-yearly basis, participating in Post-Programme surveillance reviews for the purpose of its Early Warning System. The next review will take place next week.

“Ireland has made a remarkable recovery since the crisis, and represents one of the clearest success cases of Europe’s strategy to fight the crisis,” said Mr Regling.

Mr Donohoe expressed Ireland’s appreciation for the support of the ESM in agreeing to Ireland’s early repayment in full of its outstanding IMF Programme loans and the bilateral loans to Sweden and Denmark. This was an important milestone for Ireland in its recovery, which continues at a robust pace.

It is essential that euro area Member States continue to explore how to make the economic and monetary union more effective. Part of the current discussions are focused on the future role and remit of the ESM. Discussions on the ESM lending toolkit, and on whether the ESM should play a greater role in programme design and monitoring in the future, are ongoing at both the technical and  political level. Ireland agrees that the ESM should be strengthened and is open to exploring options for its development into a European Monetary Fund (EMF). The potential role of the EMF of course requires careful consideration and deliberation.

“While discussions remain ongoing, it is clear that the ESM will continue to play a key role in safeguarding the financial stability of the euro area,” said Mr. Regling.

Notes to Editors

  • Klaus Regling is the Managing Director of the European Stability Mechanism (ESM)
  • The ESM was established in October 2012 as a successor to the EFSF (the European Financial Stability Facility) which was created as a temporary crisis mechanism in June 2010.
  • The ESM can provide financial support to Euro Area Member States where it is found to be indispensable to safeguard the financial stability of the Euro Area as a whole and of its Member States.
  • The ESM operates on a ‘cash for reform’ basis, similar to the International Monetary Fund, as it includes strict conditionality in its lending.
  • The lending toolkit of the ESM comprises direct loans to Member States, Precautionary Credit Lines, indirect and direct bank recapitalisation and bond market purchases. To date, the only instruments activated have been ESM loans and indirect back recapitalisation. The ESM has, to date, provided financial assistance to Cyprus, Greece and Spain (the assistance to Spain was used for the sole purpose of restructuring its banks). The EFSF has provided financial assistance to Ireland, Portugal and Greece.
  • The ESM implements an Early Warning System to detect loan repayment risks (preparing a quarterly payment overview for each beneficiary Member State)