Two years after the euro countries started to design a new, permanent rescue fund for their ailing economies, the fund - called ESM – is now a reality.
Economy and finance ministers from the 17 euro countries are Monday meeting in Luxembourg to founding the board of the fund, which should eventually be able to support problem countries with up to 500 billion euro.
But although ministers at the Board are signing all the legal documents to launch the fund, in recent weeks, doubts have arisen about exactly how the fund money can be used.
Spain is expected to be the first ESM-country
It is clear that the ESM should lend money to countries in trouble. Spain is expected to be the first country to receive money from the fund when the country's banking sector in November probably ask for about 40 billion euro to recapitalize Spanish banks.
But a meeting of finance ministers from the three leading euro countries Germany, the Netherlands and Finland two weeks ago caused confusion concerning the terms and conditions.
An EU summit in June opened for that ESM can pay money directly to the banks rather than that any aid as up till now must go to the state, which then distributes the money. However, only when there is established a pan-European banking supervision.
Avoiding further indebtedness
The idea of direct aid to banks is to avoid putting countries into further debt.
But finance ministers from the three pro-regulators declared to the surprise of many, the ESM can only be used forward-acting and can not lend to banks that already had problems before ESM and banking supervision became a reality.
The uncertainty is not expected to be resolved at the board meeting Monday. It will probably be up to the Heads of State and Government to clarify the doubts of interpretation, when a summit meets again in about one and a half week.
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