Value for Money? Financial Accountability of the European Stability Mechanism (ESM)

Established at the height of the Eurozone sovereign debt crisis, the intergovernmental European Stability Mechanism (ESM) has potentially considerable influence over decisions on bailing-out, bailing-in and resolving European banks. Formally, the ESM is an international organisation. At the same time, it depends on and closely interacts with at least two EU institutions — the European Commission and the European Central Bank — and one international organisation, the International Monetary Fund. The ESM is thus embedded in both the Eurozone system of economic governance and the international financial system.

This paper explores financial accountability mechanisms applicable to the ESM. Our primary goal is to identify accountability standards appropriate for the ESM and conduct an assessment of current accountability practices. As an international organisation, the ESM’s financial accountability to both EU institutions and national parliaments is limited. Hence, we also examine whether there are any important accountability gaps, given that the ESM is funded by liberal democracies and embedded in the Eurozone governance framework.