The finance ministers of 17 eurozone countries have formally rolled out a new permanent fund, European Stability Mechanism (ESM), to help rescue the ailing economy and banks in the region due to debt crisis.
Following the introduction of ESM, Luxembourg Prime Minister Jean-Claude Juncker, who chairs the meetings of euro-zone finance chiefs, said, "The introduction of the European Stability Mechanism has closed a gap in the euro area’s institutional architecture."
ESM has been designed to replace the existing loan mechanism, the European Financial Stability Facility (EFSF), and will start lending €200bn to governments that are unable to raise capital in bond markets, as reported by the Wall Street Journal.
The lending capacity of the new fund will increase to €500bn over the next 18 months with Germany contributing nearly 27% of its total size.
EFSF currently has €192bn lending capacity and will be made available until the new rescue fund reaches its full capacity.
Klaus Regling will serve as the fund’s managing director, and the first payments into it will begin this week.