Monday

25th Sep 2017

Eurozone to launch new rescue fund

  • The ESM will move into this building early next year (Photo: Valentina Pop)

Eurozone finance ministers meeting in Luxembourg on Monday (8 October) will hold the inaugural session of the permanent bailout fund, the European Stability Mechanism (ESM), which is to have a firepower of €500bn by next year as countries gradually pay into it..

The fund should have already been operational on 1 July, but constitutional challenges in Germany delayed the launch by three months.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

For now, its headquarters remain within the European Financial Stability Facility (EFSF), a temporary fund set up in 2010 and located in an office building in Luxembourg. Both will move to a bigger nearby location early next year.

Klaus Regling, a German finance official who also worked in the EU commission and is currently in charge of the EFSF, will head up the fund.

But all decisions will be taken by the board of governors, consisting of finance ministers from the 17 eurozone countries. The voting system reflects the share of paid-in capital to the fund, meaning that Germany can veto decisions.

Spain meanwhile is still "considering" formally asking for financial assistance in a bid to lower its borrowing costs. This would take the form of bond-buying by both the ESM and the European Central Bank.

The ESM can buy the bonds of a country only if the country signs up to deadlines for reforms. The ECB, unlike the ESM, can buy unlimited amounts of Spanish bonds, but has also warned that if the country does not stick to the promised reforms, it will halt the purchases.

Ministers are also likely to look at the issue of the ESM being used to directly fund ailing banks in the eurozone. A deal in June said that once a eurozone-only banking supervisor is in place, banks can tap the ESM directly. The move is again aimed at lifting the debt and deficit burden off Spain, whose banks are in need of €60bn.

But Germany, the Netherlands and Finland last week said in a joint letter that no 'legacy assets' should be put on the ESM books, meaning that the €60bn would stay on the Spanish government's books.

Talks will also continue on the banking union and the relation of non-eurozone banks to the new supervisory authority within the euro-area.

Sighs of relief as German court approves bailout fund

Markets and EU politicians breathed sighs of relief as Germany's top court rejected challenges brought against the eurozone's upcoming bailout fund. Any increase in Berlin's contribution will need parliamentary approval, however.

Bank agency shuns EU invitations

The EU's banking agency is not visiting cities that want to host the agency post-Brexit "to ensure objectivity". The medicines agency has no such qualms.

Investigation

EU bank accused of muzzling watchdog

An ongoing review of the the European Investment Bank's "complaints mechanism" could make the oversight branch less independent and less effective.

Anti-EU parties face funding cuts

Reforms proposed by Commission would reduce EU funding for nationalist and ultra-right European political parties by up to 66 percent.

News in Brief

  1. Merkel wins fourth term, exit polls say
  2. EU to hail 'aspirations' of former Soviet states
  3. UK says credit downgrade was wrong
  4. Dutch state appeals ban on taking air-polluting measures
  5. May proposes 2-year transition period after Brexit
  6. May to call on EU's 'sense of responsibility'
  7. Catalonia has 'contingency plans' for independence vote
  8. Last German polls confirm Merkel's lead

Stakeholders' Highlights

  1. EU2017EEEU Finance Ministers Agreed to Develop New Digital Taxation Rules
  2. Mission of China to the EUGermany Stands Ready to Deepen Cooperation With China
  3. World VisionFirst Ever Young People Consultation to Discuss the Much Needed Peace in Europe
  4. European Jewish CongressGermany First Country to Adopt Working Definition of Antisemitism
  5. EU2017EEFour Tax Initiatives to Modernise the EU's Tax System
  6. Dialogue PlatformResponsibility in Practice: Gulen & Islamic Thought
  7. Counter BalanceHuman Rights Concerns Over EIB Loan to the Trans Anatolian Pipeline Project
  8. Mission of China to the EUChina Leads the Global Clean Energy Transition
  9. CES - Silicones EuropeFrom Baking Moulds to Oven Mitts, Silicones Are a Key Ingredient in Kitchens
  10. Martens CentreFor a New Europeanism: How to Put the Motto "Unity in Diversity" Into Practice
  11. Access MBAGet Ahead With an MBA Degree. Top MBA Event in Brussels
  12. Idealist QuarterlyIdealist Quarterly Event: Building Fearless Democracies With Gerald Hensel