Q+A-Details of EU crisis-prevention measures

May 10 (BestGrowthStock) – European Union finance ministers agreed
emergency measures on Monday worth about 750 billion euros
($1,000 billion) with support from the International Monetary
Fund to protect the euro zone against a sovereign debt crisis.

WHAT WAS AGREED?

* The 27 finance ministers agreed at talks also attended by
representatives of the executive European Commission on the
creation of a “European stabilisation mechanism” worth about 500
billion euros.

* The IMF is expected to contribute about 250 billion euros
in addition to this, they said.

* The European Central Bank also announced steps to contain
Greece’s debt crisis, saying it would buy euro zone government
and private debt and abandoning resistance to full-scale bond
purchases.

* The ministers also called for budget consolidation,
sustainable finances, improved economic growth and closer
economic coordination. Plans for fiscal consolidation and
structural reforms would be accelerated where needed, they said.

* They underlined the importance of strengthening fiscal
discipline and establishing a permanent crisis resolution
framework.

* They reiterated the support of euro zone member states
to the ECB in its actions to ensure the stability of the euro
areas.

WHAT IS THE STABILISATION MECHANISM?

* It consists of 60 billion euros that will be available to
euro zone states facing “exceptional circumstances”, and is
similar to a 50 billion euro lending facility already available
to EU members outside the euro zone.

* These loans will carry an interest rate similar to the 5
percent rate charged on EU/IMF aid to Greece.

* Aid will be coordinated by the EU and the IMF; the
mechanism will stay in place as long as is needed to safeguard
financial stability.

* In addition, the ministers announced the creation of a
special-purpose vehicle via which euro area states would
guarantee on a pro rata basis up to 440 billion euros. This will
be available for three years and could take several weeks to
become operational.

* The special-purpose vehicle would raise money on financial
markets to buy debt of fragile euro zone states.

* The activation of the programme is subject to strong
conditionality, based on terms similar to those of the IMF.

Investment

Q+A-Details of EU crisis-prevention measures