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ALJ 2018 Hannes Hofmeister 142 representatives of organisations, such as the IMF, may be invited [...] to attend meetings as observers on an ad hoc basis’.12 The BoG is the highest decision making body of the ESM.13 Initially it was envisaged that the BoG would decide on (a) the granting of financial assistance, (b) the terms and conditions of financial assistance, (c) the lending capacity of the ESM and (d) changes to the menu of instruments et seq. only by mutual agreement14 given the far-reaching implications of these decisions. Yet, the voting rules were later modified to make sure that the ‘ESM is in a position to take the necessary decisions in all circumstances’.15 Against the backdrop of the escalating crisis, an emergency procedure was included.16 In case of such an emergency, the mutual agreement rule will be replaced by a qualified majority of 85%, whereby voting weights will be proportional to the Member States’ respective capital subscriptions to the ESM.17 Board of Directors. In addition to the Board of Governors, there will be a second decision-making body - the so-called Board of Directors. It will be ‘responsible for specific tasks delegated by the Board of Governors. Each euro area country will appoint one Director and one alternate Director, with the European Commission and the ECB as observers. A Managing Director responsible for the day-to-day management of the ESM will chair the Board of Directors’.18 Decisions by the Board of Directors will be taken by qualified majority, unless stated otherwise.19 3. Capital Structure The ESM has a total subscribed capital of € 704,8 bn., of which € 80,5 bn. is in the form of paid-in capital provided by the euro area Member States’.20 The remaining € 624,3 bn. will be provided by euro area Member States in the form of callable capital. Although the ESM’s capital base will thus (nominally) amount to € 704,8 bn., its effective lending capacity will only be around € 500 bn., giving the facility a security buffer of 40%. This significant level of over-collateralisation is supposed to help the ESM achieve the best credit rating (AAA). Each State’s share in the ESM will be based on its respective participation in the ECB’s paid-in capital. Hence, Germany, with a share of 27% of ECB capital, will contribute € 21,7 billion.21 In addition, Germany’s share of callable capital will amount to € 168,3 bn.22 Smaller states, such as Finland, with a share of 1,8% of ECB capital, will contribute € 1,4 bn. in paid-in capital and € 11,1 12 Article 5(5) ESMT. 13 Conclusions of the European Council of 24/25 March 2011, EUCO 10/1/11 REV 123, 23. 14 See Article 5(6) ESMT. The term ‘mutual agreement’ is defined in Article 4(3) ESMT: ‘The adoption of a decision by mutual agreement requires the unanimity of the members participating in the vote. Abstentions do not prevent the adoption of a decision by mutual agreement’. 15 Statement by the euro area Heads of State or Government, Dec. 9, 2011, 6. 16 An emergency exists, ‘if the Commission and the ECB both conclude that a failure to urgently adopt a decision to grant or implement financial assistance [...] would threaten the economic and financial sustainability of the euro area’, Article 4(4) ESMT. 17 See Article 4(4) ESMT. It should be noted that the emergency procedure only applies in the cases of Articles 13 – 18 ESMT, see Article 5(6) ESMT. 18 ECB, The European Stability Mechanism, EBC Monthly Bulletin July 2011, available at http://www.ecb.int/pub/pdf/other/art2_mb201107en_pp71-84en.pdf (last visited Jan. 3, 2019). 19 Article 6(5) ESMT. 20 European Council Summit Conclusions 24/25 March 2011, 24. 21 See Annex 1 and 2 of the ESMT. 22 See Annex 1 and 2 of the ESMT.