The European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM)

Structure, Objectives and Principles of Operation

Seminar Paper , 2012 , 41 Pages , Grade: 1,0

Economics - Monetary theory and policy

The article by Marcus Stallechner and Daniel Kolb deals with the structure, objectives and principles of operation of the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM). The focus is on the way from the emergence of those two companies, their company and capital structure, as well as on their financial support instruments and lending operations. The topicality and effects on the economy as well as the great public interest make this to an interesting article, which approaches the details and facts of the EFSF and ESM.

Inhaltsverzeichnis (Table of Contents)

• I. Abstract
• II. The European Financial Stability Facility (EFSF)
  • 1. Emergence of the EFSF
  • 2. Structure
    • 2.1. Company Structure
    • 2.2. Capital Structure
  • 3. Principles of Operation
    • 3.1. Process of Support Requests
    • 3.2. Funding Strategy
  • 4. Structures and Objectives of Financial Support Instruments
    • 4.1. Bank Recapitalisation
    • 4.2. Precautionary Programme
    • 4.3. Primary Market Intervention
    • 4.4. Secondary Market Intervention
  • 5. Lending Operations
    • 5.1. The Programme for Ireland
    • 5.2. The Programmes for Portugal, Greece, Spain, and Cyprus
• III. The European Stability Mechanism (ESM)
  • 1. Introduction
  • 2. History
    • 2.1 Generic
    • 2.2 Treaty Basis and Ratification
  • 3. Structure
    • 3.1 Governance Structure
    • 3.2 Capital Structure and Contribution
  • 4. Funding Objectives and Principles
    • 4.1 Procedure
    • 4.2 Instruments
• IV. Conclusion
• V. Questions

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This paper by Marcus Stallechner and Daniel Kolb examines the structure, objectives, and operational principles of the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM). The work focuses on the development of these organizations, their company and capital structures, and their financial support instruments and lending operations. Key themes covered in the paper include:

• Emergence of the EFSF and ESM in response to the European sovereign debt crisis
• Organizational structures and governance of the EFSF and ESM
• Financial support instruments and lending operations employed by the EFSF and ESM
• Impact of these institutions on the European economy and the financial markets
• Public perception and the political implications of these institutions

Zusammenfassung der Kapitel (Chapter Summaries)

II. The European Financial Stability Facility (EFSF)

This chapter examines the emergence and structure of the EFSF. It discusses the financial crisis in Greece in 2010 and the subsequent creation of the EFSF as a temporary bailout fund for the eurozone. The chapter also explores the EFSF's company and capital structure, emphasizing the role of guarantees from eurozone member states and the impact on its AAA rating.

III. The European Stability Mechanism (ESM)

The ESM was established as a permanent rescue mechanism for eurozone countries facing financial difficulties. This chapter covers the ESM's history, including its treaty basis and ratification process. It further delves into the organization's governance structure, capital structure, and contribution system. The chapter concludes by analyzing the ESM's funding objectives, procedures, and instruments.

Schlüsselwörter (Keywords)

This paper focuses on the European Financial Stability Facility (EFSF), the European Stability Mechanism (ESM), European sovereign debt crisis, financial support instruments, lending operations, bailout funds, governance structures, capital structures, and the impact of these institutions on the European economy and the financial markets. The study highlights the importance of understanding the objectives and operational principles of these institutions, especially in the context of the ongoing challenges faced by the eurozone.

• College: University of Applied Sciences Augsburg
• Grade: 1,0
• Authors: Marcus Stallechner (Author), Daniel Kolb (Author)
• Publication Year: 2012
• Pages: 41
• Catalog Number: V213950
• ISBN (eBook): 9783656424062
• ISBN (Book): 9783656424604
• Language: English
• Tags: ESM, EFSF, Rettungsschirm