Tuesday, June 8, 2010

The World Economy... - 8/6/2010

Euroland’s Rescue Fund Was Signed Into Law To Address Debt Crisis

A rescue fund being backed by €440bn (US$524bn) in national guarantees and aimed at halting the spread of Greece’s debt crisis was signed into law on 7 June. The European Financial Stability Facility (EFSF) would sell bonds backed by the guarantees and use the money it raises to make loans to countries in need. The new entity would sell debt only after an aid request is made by a country and the bonds would be eligible for the European Central Bank refinancing operations. The fund, being created for three years, is the main part of a €750bn aid package that European Union finance ministers agreed on a month ago. Another €60bn will come from the European Commission and €250bn from the International Monetary Fund (IMF). All countries in the Euroland plan to be shareholders of the EFSF and the holding will correspond to their share of the ECB’s capital. The obligation of countries in the Euroland to issue guarantees for EFSF debt instruments will enter into force as soon as nations representing 90% of the shareholding have completed domestic parliamentary procedures. Countries that receive aids from the EFSF would be subjected to the kinds of budgetausterity conditions that Greece faces.

The World Economy... - 8/6/2010

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