Permanent stability mechanism unveiled

From 2013, the European Financial Stability Facility (FESF), which was created to provide a temporary solution to the problem of countries in financial difficulty, is to be replaced by the European Stability Mechanism (ESM), which will be permanent. According toLa Stampa, which has obtained access to an outline of the ESM treaty, the text to be debated and adopted by EU finance ministers when they meet on 24 June will provide for a 700 billion euro fund divided into 7 million shares, each worth 100,000 euros, which may be increased if need be. "Its main task will be to collect money that can be transferred to states in difficulty," and in exceptional cases it will also be authorised to "buy sovereign bonds that states are unable to place on the open market." States that make use of the ESM "will be responsible for the cost of the funding provided plus a commission," which will be determined by the duration of the loan. According to La Stampa, "this is a useful principle, which should put an end to the regrettable bargaining that we have seen over recent days, with Greece and Ireland demanding discounts on the terms of their bailouts. In two years, prices will be fixed automatically and there will be no more discussion." The ESM will be headed by Germany’s Klaus Regling, who is currently in charge of the EFSF.