EUROPEAN STABILITY MECHANISM

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EUROPEAN STABILITY MECHANISM

 

The ESM is a crisis mechanism set up to safeguard financial stability in the euro area. Its main features will build on the existing (EFSF)

The EU is one of the largest sources of FDI for India. FDI inflows from the EU to India declined from Euro 3.4 billion in 2009 to Euro 3.0 billion in 2010.

What is the ESM?
The ESM is a crisis mechanism set up to safeguard financial stability in the euro area. Its main features will build on the existing European Financial Stability Facility (EFSF).
The ESM will complement the new framework for reinforced economic surveillance in the EU. This new framework, which in­cludes in particular a stronger focus on debt sustainability and effective enforcement measures, focuses on prevention and wiri substantially reduce the probability of a crisis emerging in the future.
How will the ESM work?
The ESM will be able to provide assistance to euro area Member States in financial distress. Assistance will be conditional on ihe implementation of a strict economic and fiscal adjustment programme, in line with existing arrangements. What type of crises will be addressed?
A distinction will be made between liquidity and solvency crises. This will be based on a debt sustainability analysis (DSA) con­ducted by the European Commission and the IMF, in liaison with the ECB. DSAs are usual practice in IMF-led assistance programmes.
In case of a liquidity problem, ESM support will be provided conditional to an adjustment programme and private creditors wO be encouraged to maintain their exposure, in line with the current EU and IMF practice. Voluntary arrangements to maintain the ex­posure in a country under financial assistance were for instance already put in place in Hungary. Romania and Latvia (the so called ‘Vienna initiative’).
In the unexpected event that the debt sustainability analysis reveals that a country could be insolvent, the Member State will have to negotiate a comprehensive plan with its private creditors, in line with IMF practices, and liquidity assistance under the ESM may be provided.
A world without Europe will also be a dangerous place. As centres of power continue to proliferate, Europe wAl be required to meet its own strategic responsibilities. While Catherine Ashton, the EU foreign policy chief, may continue to build a rational European External Action Service and the European Council may make some headway in strengthening sanctions on Syria and Iran, such actions will mark the limits and not the foundations for collective action. This is a problem because ultimately security is a collective endeavour.
When it conies to terrorism, crime, immigration, climate change, conflict or access to energy or other natural resources, crises from the Middle East to central Africa show that policy makers must work together across countries to achieve both shared and national objectives.
Such interdependence is the byproduct of the economic and security integration that constituted the west at the end of the second world war. It is not a new feature in the globalised world economy but it is intense than before — even as populist and protectionist forces gain strength. The possibilities, then, for national policy makers to go it alone are far tightly restricted — not only for Europe but also the US. The implications can bp seen in the changing patterns of American global leadership. At the end of the second World War, the US took much of the responsibility for co-ordination upon itself as the undisputed leader of the West. But over time, this leadership became increasingly costly and the US became ever overstretched.
Today there is nothing undisputed about American leadership: Other actors have become responsible and assertive. Within this new arrangement, and depending upon the region and the issue, Europe has a crucial role to play.
Barack Obama’s administration has recognised explicitly this changing global context: it gave Europe a privileged position in the architecture of its 2010 national security strategy; it supported French and UK initiatives in Libya; and it made a clear decision to pivot the emphasis in its deployments.
Yet we now face the prospect that Europe will not be able to live up to its responsibilities. The EU is divided. Germany feels overburdened by the eurozone crisis and continues to downsize its military. France is only beginning to confront the extent of its fiscal challenge and could well turn inward. The UK is preparing — in its prime minister’s words — for a decade of austerity.
The absence of Europe will leave the next US administration — whether Democrat or Republican — with little choice but to expand its foreign commitments. Mitt Romney has already written that into his objectives. However, such actions will only weaken the US economy and underscore the distribution of costs and benefits across the Atlantic. In June 2011, the outgoing defence secretary Robert Gates warned against this prospect in his valedictory address in Brussels. His speech was viewed by many Europeans as alarmist; now it seems prescient. The only question is how long a hostile Congress will take to wake up to that fact. Yet finger-pointing across the Atlantic will serve no country’s national interest.
A world without Europe will be an unhappier and perilous’place — even for the US. paradigm as an aid recipient country. However, with the advent of the 2003 sisecurity Strategy, a major shift was observed in the way the EU was defining its relationship with India. The Security Strategy identified six countries, includ­ing India, for a strategic partnership, given their importance in international politics and their future role as well.

Political Dialogue & Cooperation

The periodic institutionalization of India-EU relations, with periodic sum-/nit level talks, offers a yearly platform to review progress and set new goals and targets. The 11th .India-EU Summit was held in Brussels in December 2010. This was the first Summit after the entry into force of the Lisbon Treaty. The Summit reviewed India-EU Rela­tions: stressed the importance of an ambitious and balanced conclusion of the India-EU Broad-based Trade and Investment Agreement (BTIA) in the spring of 2011; welcomed the increasing cooperation in the field of security and defence; and issued a Joint Declaration on International Terrorism.
An India-EU Joint Declaration on Culture was also signed during the Summit. In the Joint Statement issued by the two leaders, it was agreed to present the results of the 2008 Joint Work Programme on Energy, Clean Development and Climate Change at the next India-EU Summit in 2011. The Joint Statement also called for an early conclusion of the India-EU Agreement for Research and Development Coop­eration in the Peaceful Uses of Nuclear Energy; a swift finalization of the agree­ment on satellite navigation initialed in 2005; and an early implementation of the civil aviation agreement.

India-EU Economic Cooperation

India along with China leading the restructuring of global economic relations naturally calls for a substan­h. al partnership, enhancing trade and investment flows between India and the EU. The EU, as a bloc of 27 coun­tries, is India’s largest trading partner %.%’hile India was EU’s 8th largest trad­ing partner in 2009. The total bilateral trade increased by 28% to Euros 67.78 billion in 2010 compared to Euros 53.03 billion in 2009 (Indian exports of Euros 32.99 billion and Indian imports of Eu­COS 34.79 billion). In 2010, total Indian exPe’rts to the EU in different services sector were Euros 8.1 billion whereas total Indian services imports from the EU were Euros 9.8 billion.        ‘
The EU is one of the largest sources of FDI for India. FDI inflows from the EU to India declined from Euro 3.4 billion in 2009 to Euro 3.0 billion in 2010. India investment into EU has also seen a marginal decline from Euros 0.9 billion in 2009 to Euros 0.6 billion in 2010. The most important countries in the EU for FDI into India are Germany, UK, France and Italy.
With India emerging as a global service provider and India undertaking defence modernization and diversifying its weapons purchasing has opened up opportunities for further coopera­tion between India and the EU. In this context, the European Aeronautical Defence and Space Company (EADS) is pursuing joint ventures with India. The fields of energy, climate change and the environment provide another area for far reaching cooperation.

Social Issues and Civil Society cooperation

The scope for cooperation on social issues is immense since India is at the crossroads of the developed and the developing world. As India fosters its economic growth, it is also faced with meeting the millennium development goals.
In this context the EU has com­mitted to increase development co­operation to supplement Indian pro­grammes, namely SSA and the NRHM. In addition to this an Memorandum of Understanding on Cooperation on Employment and Social Affairs was signed in November 2006 and a Joint Declaration in field of Education was agreed in 2008.

Institutional Interactions

To further deepen the relationships India and EU have been regularly nego­tiating at regular intervals. So far India and the EU have held thirteen rounds of negotiations for a bilateral Broad based Trade and Investment Agreement which commenced in 2007.
Besides the India-EU Joint Com­mission and its three sub-commissions on trade, economic cooperation and de­velopment cooperation meets annually.
In addition, both sides have set up Joint Working Groups/ Joint Corn­ mittee on Counter Terrorism, Consula Issues, Agriculture and Marine Products, Energy, etc.
Both sides also have regular dialogues on Security, Human Rights, Macro-economy and Science and Tech­nology.

Bilateral Agreements

India and the EU have signed sev­eral bilateral agreements which includes cooperation in the field of Science & Technology in 2001 which was re­newed in 2007; Joint Vision Statement for promoting cooperation in the field of information and communications technology in 2001; Customs Coop­eration Agreement in 2004; Horizontal Civil Aviation Agreement in 2008; Joint Declaration on Multilingualism in March 2009 and Agreement in the field of Nuclear Fusion Energy Research in November 2009 and Joint Declaration on Culture in December 2010.

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