European finance ministers are meeting today, January 21, to begin enacting policies that will unify the region’s banking system and funnel needed funds to countries with distressed economies.
The conversations are likely to center on how the European Stability Mechanism (ESM) should provide aid for Spain, Cyprus, and Greece.
This Website Is For Financial Professionals Only
Although the worst of the three years of market emergency are over, debate over whether the ESM should take over previous bank bailouts and also over what to do with legacy assets.
The ESM has €500 billion but less than €100 billion of direct aid to banks of that is currently available. The ESM’s first responsibility is to countries who lose access to the markets. As well, the ESM may have to provide funds to bolster those countries’ credit rating.
Countries with strong economies wish to limit the ESM’s ability to help nations in trouble, saying that each country’s taxpayers should bear the bulk of the burden.
Talks will also cover technical issues
such as how to handle depreciated values of legacy assets and whether to make governments take a 5% to 15% stake in banks who receive aid.
The thought is that this mandate might discourage other countries from asking for aid and encourage them to try and fix their problems on their own.