European Financial Stability Facility

Summary:

On Monday, the Finance Ministers of the Euro-area states signed documentation establishing the European Financial Stability Facility (EFSF) in line with the actions taken by the Economic and Financial Affairs (ECOFIN) Council last month, providing more details about how this will work. Most notably, they plan to create a joint eurozone "special purpose vehicle"(SPV) which will issue up to €440bn in bonds, if needed, to provide loans which can then be used to support countries.

Together with €60bn from the European Union and €250bn from the International Monetary Fund, it provides a total of €750bn – initially for three years – which troubled Eurozone members can borrow from in times of need. After three years the fund will be replaced by a permanent crisis mechanism – the form of which is currently being debated by a high-level task force led by European Council President Herman Van Rompuy. The task force conclusions as well as further details on the functioning of the SPV will be presented at the next European summit on Thursday.