The European Stability Mechanism (ESM), the permanent rescue fund of the eurozone, goes into operation on Monday in anticipation of Spain’s potential need for a bailout. The first meeting of the ESM’s board of governors, made up of finance ministers is happening in Luxembourg two years after the idea for the fund was initially approved.
Reuters reported Monday that the 500-billion-euro ($653 billion) fund was designed as one of the measures to fight the debt crisis that has ravaged the bloc and now looms over Spain. It is expected that the ESM’s first job will be to lend the money to recapitalize Spain’s banking sector, with Madrid likely to ask for around 40 billion euros for the task.
Spain could receive the money in November, once European Commission (EC) competition authorities have given their OK to the conditions under which each bank will be recapitalized.
Spain has been hesitant to ask for the money, and Germany opposes such an action because Berlin would rather approach its own lawmakers with a bundled bailout request: money for Spain and also for Greece, put together with funding for Cyprus, which has already asked for a bailout.
Politically it will be easier for Chancellor Angela Merkel of Germany to push through a single larger package of assistance than to have to fight opposition to each one individually.
The group will also discuss Greece’s efforts to comply with the conditions for its second bailout, so that much-needed funding is released to Athens.
The meeting does have a broader purpose than the launch of the ESM. The eurozone is working to revamp its economic framework and to build in a higher degree of integration—a topic that will be under discussion during this first meeting of the eurozone finance ministers who make up the ESM’s board. To that end, one subject under discussion at the meeting will be the concept of a single budget for the whole of the eurozone.