In-house interview: European Stability Mechanism

What comes to mind when you think of a lawyers’ paradise? Maybe a world where clients pay what you ask without quibbling, or where your board grants you all the resource you need to meet their needs and you have a great work-life balance?

If you ask Ralf Jansen, general counsel of the European Stability Mechanism (ESM), paradise is the building in Luxembourg from which the organisation operates. There, Jansen and his team of 10 have been integral to building the world’s largest financial institution by lending capability, vital to the slow return to stability of the eurozone.

Jansen was one of the first people to join ESM’s forerunner, the European Financial Stability Facility (EFSF), back in 2010. The EFSF was set up as a temporary measure to get the EU through the crisis. It is controlled by the ESM as it has funding commitments related to loans to Greece, Ireland and Portugal.

(l-r) Ralf Jansen, David Eatough
(l-r) Ralf Jansen, David Eatough

Jansen, who confesses to a “passion” for international law, got in touch with EFSF CEO Klaus Regling and convinced him the fledgling body needed lawyers on board. He joined as employee 007, with a licence to grow the team.

(l-r) Ralf Jansen, David Eatough (l-r) Ralf Jansen, David Eatough

It quickly became clear the temporary solution needed to be permanent as the need for assistance continued, and that the Luxembourg private company structure of the EFSF needed to be replaced. Jansen was heavily involved in the drafting of the EU’s ESM Treaty, signed in 2012, and the ESM came into existence in October that year.

“We had to start from scratch,” says Jansen, adding that input from institutions such as the European Investment Bank (EIB), European Central Bank (ECB) and European Commission proved invaluable.

As an intra-governmental organisation, with the eurozone’s finance ministers as its board members, the ESM is not subject to national law. Jansen explains that this means everything from pension schemes to healthcare benefits to commercial contracts had to be drawn up by ESM lawyers. It also means that every transaction the ESM makes must be approved by the board, and is subject to parliamentary scrutiny in stakeholder states.


Last year the ESM recruited its first deputy general counsel in the shape of ex-DLA Piper partner David Eatough. Eatough says the job is “legally fascinating”.

“We’re the creature of the euro-area governments,” he adds. “Legally, that’s unusual. You’re close to the policymakers.”

“What’s also challenging is that what we’ve done so far had so much public attention,” Jansen puts in. “For example, if we prepare a loan agreement for a country, it may go to national parliaments. Obviously, the amounts involved are huge and the decisions affect the lives of many people. That’s why it’s important there’s absolutely nothing wrong with these documents.”

Funds for disbursement under the ESM’s lending programmes are raised from the capital markets through long and short-term bond and bill issuances. According to the ESM Treaty, initial maximum lending volume is €500bn (£415bn).

The ESM’s capital is made up of €80bn of “paid-in capital” from ESM member states and is not available for lending. An additional €620bn is “committed callable capital” that can be called on to restore paid-in capital in the unlikely case it is reduced due to loss absorption.

A state contributes based on the ECB’s capital key which, in turn, reflects that country’s share of the population and GDP of the EU. 

“Some time ago we moved from back-to-back funding to a diversified strategy that is more efficient and more like treasury operations in the public and private sectors in the rest of the world,” Eatough says.

Should the EFSF or ESM start to issue in other currencies than the euro this will entail “basic” hedging to remove currency exposure. The move would require the legal team to recruit a derivatives lawyer.

“Because our business model is so diversified, it’s in some ways a paradise for lawyers,” says Jansen.

He says an ideal ESM lawyer is someone who has expertise in a particular area but is interested in policy matters too.

The team is multinational. German-born Jansen and Brit Eatough oversee a team hailing from across the EU, divided into areas of responsibility such as funding, lending, and commercial. The latter group looks after ESM’s contracts and its relationship with suppliers. 

The future of the ESM is interesting, given that it was set up in response to a crisis. It will grow with the eurozone, with new zone members required to join.

“The ESM is a permanent institution but this doesn’t mean we expect the euro area to be in a permanent crisis,” Jansen says. 

He sees a role for the ESM in a more stable environment.

“The ESM’s presence is reassuring for the markets,” he says “It’s like the fire department: even if there’s no fire everyone sleeps better knowing it’s there. As the ESM is close to the financial markets it’s our role to advise policymakers how their decisions affect these markets.

“In the context of the banking union in Europe the ESM has been asked to be ready for the direct recapitalisation of banks should the euro area governments decide to activate this. There’s scope for the ESM to have a lot of work still.”


This is unlikely to extend to the realm of financing projects, which is the role of the EIB, but there will be plenty of work with existing loans as well as any new lending.

In the meantime, as the legal team expands, the lawyers joining the ESM are becoming part of a group of people who, Eatough says, are committed to their work.

“The ESM is the expression of solidarity among euro member states,” he says. “We really feel we’re making a difference, not just chasing five
basis points on a transaction.”

Who knew? Heaven, it turns out, is on a hill in Luxembourg.

(l-r) Ralf Jansen, David Eatough