Eurozone finance ministers (Eurogroup) reached an agreement in principle to widen the mission of the European Stability Mechanism (ESM) to assist banks as well as member states.

Therefore, the ESM will also be acting as a Single Resolution Fund (SRF) for distressed lenders, decreasing systemic volatility.

The introduction of this institutional safety net is timely, advancing the ambition of a banking union weeks before the European summit (28-29) that is expected to advance a bold reform agenda. The policy has secured Germany’s backing, Reuters reports.

Commenting on the achievement during a conference in Lisbon, the President of the Eurogroup, Mario Centeno, said the SRF should be in operation “before 2024,” reducing the perception of risk in the Eurozone.

In the meantime, Germany and France continue negotiations with the objective of reaching a common Franco-German position on the Eurozone’s reform by June 19. The French finance minister Bruno Le Maire and his counterpart held 12-hour marathon talks on Monday in Paris.

France insists in the introduction of a policy instrument that would facilitate countercyclical policy in a crisis period, including investment. To this end, Paris has proposed an EU budget funded through direct taxation, including a share of corporate tax. Germany is reluctant to accept anything that suggests social transfers.