Financial assistance to EU Member States and non-EU countries

Briefing 05-09-2022

Since the creation of the economic and monetary union, the European Union has created various instruments to provide financial assistance for its Member States. Originally (since 2002) such assistance was provided through the balance of payments (BoP) assistance programme, which was reserved only for Member States with a derogation, i.e. those that had not yet adopted the euro. However, following the EU economic and sovereign debt crises (2009 to 2012), four new instruments were created: the (i) Greek Loan Facility (GLF), (ii) European financial stabilisation mechanism (EFSM); (iii) European Financial Stability Facility (EFSF); and (iv) the European Stability Mechanism (ESM). In total, eight EU countries received funds through those instruments. Sooner or later, all the above instruments and facilities are to be phased out, with the ESM the only one to remain in the long term for all EU Member States. Given that the ESM was created through an intergovernmental agreement, there were efforts by the Commission to integrate it into EU law. This, however, was effectively abandoned following a lack of support in the Council. At the same time, during the COVID 19 pandemic, an additional credit line was created, to help Member States in case of need. As a result of the bold steps taken at EU level (including SURE and Next Generation EU), it has yet to be used. Nonetheless, EU financial assistance is not limited to EU Member States. Non-EU partner countries, such as Ukraine, can obtain financial aid through macro-financial assistance (MFA). In contrast to other instruments available, MFA is designed not to support economic and social development, but to restore the country's external financial situation, while encouraging economic adjustments and structural reforms. As a result, both the conditions required and the amounts provided, are different to those concerning Member States.