Brussels, 03/02/2012 (Agence Europe) - France's European affair minister, Jean Leonetti, said on Friday 3 February that the European Stability Mechanism (ESM) agreed upon by sherpas of the 17 eurozone nations on Thursday 2 February amounted to the creation of a “genuine European Monetary Fund”, that France has been calling for for many a long year (see EUROPE 10542).
President of the European Council Herman Van Rompuy said the ESM, the new European bailout fund, would be up and running in July 2012, a year earlier than initially planned as a permanent backstop with a wide range of means of intervention based on solid finance. The ESM will have an effective lending capacity of €500 billion, based on €700bn of subscribed capital, of which €80bn will be in cash and the remaining €620bn in call-up capital. It will be able to provide financial aid to a struggling country in exchange for the country introducing an austerity programme. The ESM will have the option of buying up sovereign debt bonds directly from the government of the countries in question or indirectly on the secondary bond markets, and will be able to bail out national banks. If a country's national debt has to be restructured, the ESM will not automatically require private sector involvement (in other words, it will operate in the same way as the IMF). From March 2013 onwards, only the 25 member states (all the current member states with the exception of the United Kingdom and the Czech Republic) that have ratified the budget pact will be eligible for ESM funding.
In March 2012, Europe's leaders will decide whether the ESM is large enough to prevent any further spread of the sovereign debt crisis. (MB/transl.fl)