The eurozone’s new bailout fund the European Stability Mechanism has been given the green light by finance ministers in Luxembourg.
It is aimed at protecting the bloc’s most distressed economies.
Ahead of the meeting Eurogroup chief Jean-Claude Juncker said:’‘It’s still the case that the weaker member countries need to make a big effort, and it is still the case that solidarity is a two way street and must be equally shared.’‘
The ESM will be able to lend a total of 500 billion euros and will eventually replace the EFSF, the eurozone’s current firewall against the debt crisis.
Germany will be the biggest net contributor.
The fund’s lending capacity will be based on 80 billion euros of paid-in cash. The rest will be raised on the markets if and when it’s needed.
Despite that, the ESM’s inauguration has come amid growing concerns over Greece and Spain’s debt levels, even though Madrid has so far denied the need to seek financial aid.
The fund should reach its full capacity by 2014.
From Luxembourg, euronews Enrico Bona reported:
“The first task for the ESM fund, which has been launched here in Luxembourg two years after it was endorsed by EU leaders, will be to recapitalise Spain’s banks. As for a full bailout for Madrid, for the moment at least, the Spanish government’s financial needs seem less urgent than they did a few months ago.’‘