SAFE Policy Panel: Safeguarding the Euro – the European Stability Mechanism
Safeguarding the Euro – the European Stability Mechanism
Klaus Regling, Managing Director, European Stability Mechanism (ESM)
Discussed by Benoît Cœuré (ECB) and Jan Pieter Krahnen (SAFE and Goethe University)
The ESM (as well as its predecessor, the EFSF) was not part of the initial (Maastricht) blueprint for Europe’s Economic and Monetary Union (EMU). The Great Financial Crisis and the subsequent European sovereign debt crises, however, made forcefully clear that the euro could only survive when given the institutional means to turn member countries, having lost access to financial markets, around. However, such a backstop mechanism inevitably comes with issues of moral hazard, i.e. it creates incentives to take greater risks. Over time the ESM has developed an arsenal of tools to manage crises. As other innovations spawned by the crises – the ECB’s unconventional policy and the establishment of a banking union – the ESM contributes to making EMU more resilient.
Klaus Regling is the first Managing Director of the ESM, as well as CEO of the EFSF. Prior to that, he worked at the International Monetary Fund, in the German Ministry of Finance (inter alia preparing for EMU) as well as Director-General for Economic and Financial Affairs at the EU Commission. Joint with colleagues, he has just published a book on Safeguarding the Euro in Times of Crisis, a blow-by-blow account of the ESM’s evolution, as seen from the inside.
Benoît Cœuré is a member of the ECB’s Executive Board, charged with international relations and market operations. He also chairs the Committee on Payments and Market Infrastructures of the Bank for International Settlements.
Jan Pieter Krahnen is Professor of Banking and Finance at Goethe University and Director of the Research Center SAFE. He also serves on the advisory board of Germany’s Ministry of Finance.
We would be pleased to welcome you to this event.