Page - 143 - in Austrian Law Journal, Volume 2/2018

ALJ 2018 European Monetary Fund 143 bn. in the form of callable capital and guarantees.23 Last but not least, states in which GDP per capita is less than 75% of the EU average are given a discount in the first twelve years of their membership in the euro area.24 In light of the ESM’s strong capital backing (i.e. the combination of paid-in capital and callable capital) credit enhancements, such as the ones put in place under the EFSF due to its structure of guarantees only, will no longer be required. 4. Instruments As outlined above, the purpose of the ESM is to reduce instability in the euro area by providing financial assistance to its Member States. The financial assistance envisaged under the ESM Treaty can take the form of:  Loan disbursements25  Precautionary facilities26  Facilities to finance the recapitalisation of banks27  Facilities for the purchase of bonds in the secondary markets28  Facilities for the purchase of bonds in the primary markets29 Financial assistance will normally be granted in the form of a loan to an ESM Member State. Such loans are subject to strict conditionality: ‘The conditionality attached to the ESM loans shall be contained in a macro-economic adjustment programme detailed in the Memorandum of Understanding (MoU), in accordance with Article 13(3)’.30 The financial terms of each ESM loan on the other hand will be specified in a separate financial assistance facility agreement. Other instruments include precautionary facilities,31 facilities to finance the recapitalisation of banks,32 facilities for the purchase of bonds in the secondary markets and facilities for the purchase of bonds in the primary markets. It should be noted that the Board of Governors may from time to time review the list of financial assistance instruments and decide to amend it.33 However, such amendments require mutual agreement.34 23 See Annex 1 and 2 of the ESMT. 24 See European Council Summit Conclusions 24/25 March 2011, 34. 25 See Article 16 ESMT. 26 See Article 14 ESMT. 27 See Article 15 ESMT. 28 See Article 18 ESMT. 29 See Article 17 ESMT. 30 Article 16(2) ESMT. 31 See Article 14 ESMT. 32 See Article 15 ESMT. 33 See Article 19 ESMT. 34 Article 5(6)(i) ESMT.