Enlarge image Federal Minister of Finance Dr. Wolfgang Schäuble (© Federal Ministry of Finance, Photo: Ilja C. Hendel) The European Stability Mechanism (ESM) has finally gone into effect some three years after the onset of the ongoing euro crisis. The finance ministers of the 17 countries that use the common European currency all traveled to Luxembourg to attend the meeting that launched what is hoped to be the euro’s savior. José Manuel Barroso, the president of the European Commission, said that the ESM was a very important instrument, only comparable in importance to the International Monetary Fund (IMF).

German Finance Minister Wolfgang Schäuble said that the creation of the ESM would act as a signal for stabilization in international monetary markets. “We are implementing what we agreed to, step by step – and so now the ESM is going into effect. We are predictable, we are reliable and the financial markets will also eventually realize this, too.” But EU currency commissioner Olli Rehn said that nobody was in the mood to celebrate – there were still too many challenges to overcome, he underlined. He did say, however, that he was more optimistic than he had been during spring that the crisis would be overcome. Jean-Claude Juncker, the head of the Euro Group, said that Monday was “a good day for Europe.”

The ESM will ultimately have 500 billion euros at its disposal to protect troubled countries from going broke. Spain is expected to be the first country to tap into the funds, because it needs about 100 billion euros in order to bail out its troubled banking sector.

Enlarge image (© picture alliance / dpa) German Chancellor Angela Merkel had agreed to the creation of a permanent rescue fund along with other EU politicians back in December 2011, although the fund was originally supposed to go into effect in August of this year. Fast-track procedures were then filed with Germany’s Constitutional Court, which prevented the ESM from going into force as planned. The Karlsruhe-based court ruled on September 12 that Germany’s participation was indeed constitutional, although it clarified conditions ensuring that Germany’s share could not exceed 190 billion euros without further parliamentary approval. 

Klaus Regling, a German economist, is to head the ESM. Regling is also the head of the European Financial Stability Facility (EFSF), which is due to expire at the end of June 2013.

Eurozone finance ministers also discussed the situation in both Greece and Spain during their meeting. The inspectors sent on behalf of the IMF, the ECB and the European Commission to inspect Greece’s progress in terms of financing have not completed their report yet.