EUROPEAN COUNCIL 24-25 March 2011

EU leaders agree terms of permanent rescue fund

By Simon Taylor - 25.03.2011 / 01:20 CET

European Stability Mechanism will be able to lend €500 billion to eurozone countries in financial difficulties.

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Fact file

European Stability Mechanism

•   Succeeds European Financial Stability Facility after June 2013

•   Will have effective lending capacity of €500 billion

•   Subscribed capital of €700bn

•   €80bn in paid-in capital provided by eurozone countries from July 2013 in five equal instalments

•   Committed callable capital and guarantees worth €620bn

•   between 2013 and 2017 member states agree to provide, if needed, appropriate instruments more quickly to maintain a 15% ration between paid-in capital and outstanding amount of ESM issuances

•   Contribution key based on European Central Bank capital key. Countries with a per capita gross domestic product of less than 75% of the EU average will have a temporary correction for 12 years after joining the euro (three quarters of the difference between gross national income and ECB capital shares)

•   ESM can buy the bonds of a member state experiencing severe financing problems on the primary market

•   Pricing: ESM funding cost plus a charge of 200 basis points (bps) on the entire loan and a surcharge of 100bps for loans for more than three years

•   Collective action clauses for private sector involvement

•   Preferred creditor status