Page - 141 - in Austrian Law Journal, Volume 2/2018

ALJ 2018 European Monetary Fund 141 II. The Main Features of the New EMF As already mentioned above, the Commission does not intend to set up the EMF anew from scratch. Rather, the new EMF is to be built on the well-established structure of the ESM.7 Hence, a brief overview of the main elements of the ESM is in order before we turn to the changes introduced by the Commission proposal. A. The European Stability Mechanism (ESM) The contours of the ESM, the facility, which took over from the EFSF in 2012, were first revealed at the European Council meeting on March 24-25, 2011, and later specified in the ESM Treaty (ESMT). 1. Function The purpose of the ESM is similar to that of the EFSF, namely to reduce instability in the euro area by providing financial assistance to its Member States under strict conditionality.8 Yet despite this similar function, the ESM differs significantly from the EFSF in a number of respects as outlined below. 2. Legal Nature, Institutional Structure and Governance In contrast to the EFSF, which had been established as a private company (a société anonyme under Luxembourg law)9, the ESM was established as an intergovernmental organisation on the basis of a treaty (the ESM-Treaty) between the euro area Member States. This international treaty was signed by the Heads of State and Government of the euro area on February 2, 2012 and subsequently ratified by national parliaments.10 It eventually entered into force on September 27, 2012. The institutional structure of the ESM is based on two pillars: The Board of Governors and the Board of Directors: Board of Governors. The key decision-making body of the ESM is the Board of Governors (BoG). It is consists of the euro area Finance Ministers as voting members, while the European Commissioner for Economic and Monetary Affairs and the President of the ECB may also participate in the meetings of the BoG but only on an observer basis.11 ‘Other persons, including 7 In legal terms, it will succeed to and replace the ESM, including in its legal position, with all its rights and obligations. 8 See Article 3 of the ESM Treaty (ESMT), available at http://www.european-council.europa.eu/media/582311/05- tesm2.-en12.pdf (last visited Jan. 3, 2019), which provides: “The purpose of the ESM shall be to mobilise funding and provide stability support under strict conditionality, appropriate to the financial assistance instrument chosen, to the benefit of ESM Members which are experiencing, or are threatened by, severe financing problems, if indispensable to safeguard the financial stability of the euro area as a whole and of its Member States. For this purpose, the ESM shall be entitled to raise funds by issuing financial instruments or by entering into financial or other agreements or arrangements with ESM Members, financial institutions or other third parties.” 9 See European Financial Stability Facility, Articles of Association, Article 1(1), available at http://www.efsf.europa.eu/attachments/efsf_articles_of_incorporation_en.pdf (last visited Jan. 3, 2019). 10 Membership in the ESM shall be open to the other Member States of the EU once they meet the criteria for joining the euro area and their ‘derogation’ status is abrogated, Article 2(1) ESMT. 11 Conclusions of the European Council of 24/25 March 2011, EUCO 10/1/11 REV 123, 22. See also Article 5 (3) ESMT.