UPSC Prelims 2016 Q82: Current Affairs – International Organisations & Groupings
‘European Stability Mechanism’, sometimes seen in the news, is an
- (a) agency created by EU to deal with the impact of millions of refugees arriving from Middle East
- (b) agency of EU that provides financial assistance to eurozone countries
- (c) agency of EU to deal with all the bilateral and multilateral agreements on trade
- (d) agency of EU to deal with the conflicts arising among the member countries
Answer: (b) agency of EU that provides financial assistance to eurozone countries
Explanation
European Stability Mechanism (ESM)
The ESM was set up in 2012, with its base in Luxembourg.
It gives financial assistance to eurozone countries in serious financial trouble.
| Feature | Detail |
|---|---|
| Created after | The eurozone debt crisis |
| Replaced | The temporary European Financial Stability Facility |
| Lending capacity | 500 billion euros |
| Helped | Greece, Cyprus, Spain |
| Condition | Loans come with reform programmes |
The options checked:
| Option | Verdict |
|---|---|
| (a) Agency to deal with refugees arriving from Middle East | Incorrect |
| (b) Agency of EU that provides financial assistance to eurozone countries | Correct |
| (c) Agency to deal with agreements on trade | Incorrect; trade is handled by the European Commission |
| (d) Agency to deal with conflicts among the member countries | Incorrect |
Answer: (b) agency of EU that provides financial assistance to eurozone countries.
Why each option is right or wrong
- (a) Incorrect. The ESM does not deal with refugees arriving from the Middle East.
- (b) CORRECT. The ESM provides financial assistance to eurozone countries.
- (c) Incorrect. Bilateral and multilateral agreements on trade are not its work.
- (d) Incorrect. It does not settle conflicts among the member countries.
Key point
European Stability Mechanism (2012, Luxembourg): permanent bailout fund of the eurozone; 500 billion euro capacity; helped Greece, Cyprus and Spain.
Remember
ESM = eurozone bailout fund.
Common mistakes
- Reading 'stability' as political stability or peacekeeping.
- Thinking it covers all EU members; it is for the eurozone only.
- Confusing the ESM with the European Central Bank.
Exam tip
'Stability' in EU bodies means financial stability.
Sources
- European Stability Mechanism — About us
- Treaty Establishing the European Stability Mechanism (2012)