'European Stability Mechanism', sometimes seen in the news, is an
Answer & explanation
Answer: (b) agency of EU that provides financial assistance to eurozone countries
The European Stability Mechanism (ESM) is the permanent rescue fund of the euro area. It lends money and gives other financial help to euro area countries in severe financial distress, acting as a lender of last resort. Strictly, the ESM calls itself an intergovernmental organisation of the euro-area states rather than an EU agency, so (b) is the closest option.
- ✓ (b) Set up on 8 October 2012 as the successor to the temporary European Financial Stability Facility, the ESM gives loans and other assistance to euro area members that cannot borrow from markets at sustainable rates.
- ✗ (a) Refugee arrivals are handled through other EU policies and funds; the ESM is a financial crisis fund and has no refugee role.
- ✗ (c) Trade agreements are dealt with by the EU's own institutions. The ESM is a financial-crisis fund and has no trade role.
- ✗ (d) The ESM does not settle disputes among members; it lends money to countries in financial trouble.
Remember · ESM (set up 2012) is the permanent euro-area bailout fund, successor to the EFSF; it lends to eurozone countries in severe financial distress.
Sources
- Who we are (European Stability Mechanism), intergovernmental status ↗ “The European Stability Mechanism is an intergovernmental organisation established by member states of the euro area in 2012. … The ESM carries out this mission by providing loans and other types of financial assistance to member states that are experiencing or are threatened by severe financial distress.”
- History (European Stability Mechanism) ↗ “The European Stability Mechanism (ESM) was set up on 8 October 2012 as a successor to the EFSF. It is a permanent solution for a problem that arose early in the sovereign debt crisis”
Question and answer: UPSC's official GS Paper I (2016, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 1 Oct 2026 (how we verify). ·