The EU’s Council of Ministers today approved a regulation amending the European Financial Stabilisation Mechanism (EFSM) in order to protect non-euro area member states from any risk arising from financial assistance given to a euro area country.

This principle was endorsed on 17 July 2015 by a joint statement of the Commission and the Council. It was agreed along with a decision to grant €7.16bn in short term financial assistance to Greece under the EFSM.

Specifically, the regulation ensures that financial assistance from the EFSM to a euro area member state will only be granted if legally binding provisions are in place guaranteeing that non-euro area member states are immediately and fully compensated for any liability they may incur as a result of a failure by the beneficiary to repay the financial assistance in accordance with its terms.

The EFSM provides financial assistance to EU member states in financial difficulties. It relies on funds raised by the Commission on the financial markets under an implicit EU budget guarantee.