Finance Minister Tonio Fenech told Parliament yesterday that Malta’s paid-up capital in the European Stability Mechanism (ESM) amounted to €58 million divided in five instalments all paid by mid-2014.
Mr Fenech was introducing the second reading of the “Participation and Granting of Financial Stability Support under the European Stability Mechanism Bill”, ratifying the ESM Treaty, which is to come into force by July 1.
The minister said that the first instalment amounting to €11.7 million would be paid next month.
The second instalment was to be paid in October, with two other instalments in 2013 and the last instalment in mid-2014. This paid-up capital amounted to 15 per cent of the issuance made by the fund itself.
He said that the ESM was more advantageous for Malta than the European Financial Stability Facility (EFSF) because the burden carried by the country decreased.
The callable capital led to a decrease in Malta’s potential burden from €700 million to €512 million. This was the result of decisions taken to link the burden shared by each country in proportion to its gross domestic product.
Malta was to have 1.731 of shares in the ESM. Voting strength was similarly proportional to capital strength and dividends were to be paid pro-rata. Malta benefited from the subscription key with a correction of €14 million. Otherwise Malta would have had to pay €72.8 million.
The 17 eurozone member-governments would be issuing bonds.
The ESM’s main objective was to safeguard the euro and the eurozone. It was a permanent financial institution which had the authority to obtain other financing from the international markets.
It could also intervene to avoid economic crisis in eurozone member states and in financial institutions.
The ESM replaced the EFSF which was built around guarantees by member states. The full capacity of the ESM amounted to €500 billion.
Eurozone finance ministers were the governors of the ESM.
The European Commissioner for Monetary Affairs and the President of the European Central Bank were to hold observer status on the Board of Governors.
Decisions were to be taken by consensus. However, in cases of emergency a qualified majority of 85 per cent was enough for decisions to come into force. Other decisions were to be taken by simple majority.
Minister Fenech said that the euro was beneficial to the EU and to Malta which experienced economic growth since joining the eurozone.
Financial crisis in eurozone member states could affect Malta in a negative way because the EU was Malta’s largest trading partner. Every member state had to shoulder responsibility for financial stability.
The ESM did not aim only to safeguard the euro but also to give economic stability to member states, concluded Minister Fenech.
At the beginning of the debate, Minister Fenech said the House was discussing in parallel the Bill on the European Stability Mechanism treaty (ESM) in the plenary session while the House Committee on Foreign and European Affairs was discussing the ratification of the EU treaty on the simplified revision procedure which also had an effect on the ESM.
Minister Fenech was answering queries made by Alfred Sant (PL).