According to the regulation, member states in difficulties caused by exceptional circumstances beyond their control may ask for financial assistance from the mechanism. These circumstances could be a serious deterioration in the international economic and financial environment. It should allow the Union to respond in a coordinated, rapid and effective manner. Its activation will be subject to strong conditionality to preserve the sustainability of public finances of the beneficiary member state and enable it to regain its capacity to finance itself on the financial markets. Loans will be managed by the European Central Bank.
The facility foresees a lending envelope of up to 60 billion euros. In addition, euro area member states are ready to complement such resources through a Special Purpose Vehicle up to a volume of 440 billion euros. This instrument is guaranteed on a pro rata basis by participating member states in a coordinated manner. It will expire after three years. The International Monetary Fund (IMF) will participate in financing arrangements and is expected to provide at least half as much as the EU contribution.
At the same time, the EU will urgently start working on the necessary reforms to complement the existing framework to ensure fiscal sustainability in the euro area. Ministers underlined the importance of strengthening fiscal discipline and establishing a permanent crisis resolution framework. In addition, they emphasised the need to make rapid progress on financial market regulation and supervision. They explored among possible initiatives a stability fee, which would commit the financial sector to bear its share of the burden in case of a crisis, and a global transaction tax.
Source/copyright: EU website
