Have the European emergency funds achieved their objectives, and when will the loans be repaid?

The financial crisis resulted in many EU member states’ budgetary positions deteriorating sharply.

In the spring of 2010, an untenable situation emerged in Greece, presenting potentially serious consequences for the entire euro area. The European Commission and the European Central Bank (ECB) quickly agreed to launch a financial assistance programme for Greece.

From June 2010 onward, a number of emergency funds were established on the initiative of the EU member states that have the euro as their currency. The funds are intended specifically for euro-area countries at risk of finding themselves in the same financial situation as Greece.

• Greek loan facility (GLF, 2010): a package of bilateral loans from euro-area countries, coordinated by the European Commission, combined with support from the IMF;
• European Financial Stabilisation Mechanism (EFSM, 2011): a temporary fund on a community basis (supported by all EU member states together);
• European Financial Stability Facility (EFSF, 2011): a temporary fund for and by euro-area countries on an intergovernmental basis (supported by the countries of the euro area);
• European Stability Mechanism (ESM, 2012): a permanent fund on an intergovernmental basis between the euro-area countries, replacing the temporary EFSF.
• We published a report on the use of EU emergency funds in 2015.These emergency funds were used as part of the financial assistance programmes for Greece, Ireland, Portugal, Spain and Cyprus.

The various assistance programmes were largely devised in consultation with the IMF, see table below.

More information

• Emergency assistance for eurozone countries during the crisis, Netherlands Court of Audit (10-09-2015)

The countries contributing to the emergency funds have a considerable financial interest. As a member of the euro area, the Netherlands acts as guarantor for many billions of euros in the emergency funds set up by the euro-area countries, and also has billions of euros in loans outstanding.

The total maximum lending capacity of all four emergency funds together was approximately €850 billion. To give a complete picture of the Netherlands’ financial stake, the following amounts should be added:

• €2.4 billion guarantee for a 4.7% share of the Balance of Payments Programme (comparable to the EFSM, but only for non-euro area EU countries);
• €1.8 billion for 2.2% (Dutch share) of IMF emergency assistance for euro-area countries. The IMF support was granted in addition to the EU emergency assistance.

The Netherlands has guaranteed a total of approximately €90 billion of the emergency assistance funds (including support through the IMF). In addition it has contributed almost €8 billion in the form of direct loans to Greece and capital paid into the ESM.

The assistance programmes have now been concluded and the loans will be repaid in the future.

Use of the ESM during the corona pandemic

The ESM emergency fund was also used to counter the financial and economic consequences of the COVID-19 crisis. On 23 April 2020, the EU member states’ heads of state and government endorsed a package under which €240 billion can be lent from the ESM. The ESM’s credit line came into operation on 15 May 2020 and was concluded at the end of 2022. The package is available to member states that request assistance. To date no requests have been made.

More information

• How has the EU responded to the COVID-19 crisis and what is the impact on the Netherlands?
• ESM’s role in the European response to Covid-19 - Explainer, timeline and documents on ESM pandemic crisis support

Reform of the ESM

In spring 2021, the ESM members signed an agreement to amend the ESM Treaty. Under the amended ESM Treaty, the ESM will play a stronger role in future assistance programmes, have more instruments to manage member states’ debts and act as the backstop for the Single Resolution Fund (SRF) for failing banks in the Eurozone. The Italian parliament was the only parliament not to have ratified the amendments to the ESM treaty by the end of January 2024. The common backstop for the SRF therefore cannot be established yet and agreements on the further strengthening of the ESM have not yet come into force.

More information

• ESM treaty, amending agreement
• Single Resolution Fund - Explanation on Single Resolution Fund on SRB-website 

The EFSF and the ESM were established with the objective of providing financial assistance to euro-area countries in financial difficulties. The EFSF temporary emergency fund was followed by the permanent ESM emergency fund in 2012.

On 15 June 2017, an independent evaluator – brought in by the chair of the Board of Governors of the ESM – presented an evaluation report on the emergency assistance programmes implemented between 2010 and mid-2016, totalling around €300 billion. The report covered all five programme countries, i.e. Ireland, Portugal, Spain, Cyprus and Greece (up to and including the second programme).

The evaluation examined the relevance, effectiveness and efficiency of the financial assistance provided by the EFSF and the ESM.

The report concluded that:

• the establishment of the two emergency funds was indispensable to sustain financial stability in the euro area;
• the funds fulfilled their mandate effectively;
• all five programme countries that received financial assistance improved their debt sustainability and economic fundamentals thanks to the assistance programmes.

On 11 June 2020 the ESM published its evaluation of the financial assistance provided to Greece. The evaluation focused on the 2015-2018 ESM programme. The main conclusions according to the minister of Finance were:

• the programmes restored stability to the Greek economy, laid the foundations for reform and strengthened Greek institutions. The programmes were vital for keeping Greece in the euro area. However, the programmes had higher social costs than in other programme countries, in part because of austerity measures;
• priority was given to achieving the fiscal targets of the ESM programmes. In consequence, the public investment budget was underspent and insufficient attention was paid to growth-enhancing reforms;
• the Greek crisis strengthened the banking union, which helped restore trust and stability in the Greek banking sector.

More information

• EFSF/ESM Financial Assistance (PDF) - Evaluation Report  by independent evaluator (15-06-2017)
• Independent evaluation on Greek financial assistance (11-06-2020)
• Kamerstuk 21 501-07 Nr. 1707, Raad voor Economische en Financiële Zaken - Letter minister of Finance regarding annual meeting ESM of 11 June 2020 (25-06-2020) (Dutch only)

The emergency assistance received by euro-area countries since 2010 consists of loans that the recipient countries are required to repay. 

The ESM website provides an overview of the loans involving a large financial interest and that were granted through the main emergency funds (the EFSF and ESM) and the dates on which Cyprus, Greece, Ireland, Portugal and Spain ultimately have to repay these loans.

The ESM loans to Spain have the earliest repayment date, in 2027. The longest period for repayment is for the EFSF loans to Greece, with the final repayment date being in 2070.

More information:

• ESM Repayments Dashboard

European Court of Auditors

• Reforming the EU’s economic governance – Opportunities with risks and challenges (2023)
• Commission’s surveillance of Member States exiting a macroeconomic adjustment programme (2021)
• How the EU too account from the lessons learned from the 2008-2012 financial and sovereign debt crisis (2020)
• The Commission’s intervention in the Greek financial crisis (2017)

Weblog post by college member Ewout Irrgang, 14-10-2020

The ESM and the importance of independent audits