European Financial Stability Facility

The European Financial Stability Facility ( EFSF short, English European Financial Stability Facility ) is a public limited company (société anonyme) under Luxembourg law and is based in Luxembourg (city) and serves as a temporary provisional stabilization mechanism. It was established on 7 June 2010, on 4 August 2010 fully operational. Since 1 July 2013, the European Stability Mechanism (ESM ) is the only institution for the financial support of Member States of the euro area. Since that day, the EFSF is not responsible for the funding of programs or new credit facilities. Current director (CEO) Klaus Regling, the German.

The EFSF is one of the resources of the European Union and the Member States of the euro zone, which are intended " to secure the financial stability of the entire euro area". Thus, the EFSF is part of the package of measures commonly referred to as Euro bailout. It is secured by guarantees of the euro states in the amount of 780 billion euros and has a Verleihkapaziät of about 440 billion euros.

2.1 Setting of the provisional stabilization mechanism
2.2 Structure and resources 2.2.1 Participation by Member States

3.1 Greece
3.2 Ireland
3.3 Portugal
3.4 Spain
3.5 Cyprus
3.6 Slovenia

4.1 Germany 4.1.1 Criticism of state institutions
4.1.2 Other criticisms

Legal framework

The Maastricht Treaty, in which the monetary union was decided in 1992, financial support for over-indebted member states should be excluded. Therefore, the Stability and Growth Pact put it on the Member States concrete deficit and debt limits, and it was explicitly a strict non- assistance clause ( " no-bailout clause" ) agreed that forbade a liability of the Union or by individual Member States for the debts of other Member States. Thus, the ownership and financial discipline of the individual States should be ensured. Thus, the moral hazard problem should be prevented Member States to have the expectation of being able to hope in case of insufficient own budgetary and debt discipline that other countries pay back their debts. However, this Stability and Growth Pact has now been violated by the states over 60 times without even a single time the contract for this case sanctions were decided. Beginning of 2010 slipped Greece and other euro -zone countries in debt crises and the euro crisis began. Thus, the euro -zone countries saw themselves compelled to adopt in May 2010, the European Financial Stabilisation Mechanism ( EFSM ) as a temporary stabilization mechanism to curb a self-reinforcing critical development with the risk of sovereign defaults. Since the volume of these measures are not sufficient to contain the crisis, the European Council of the EFSM decided in December 2010, by a further stability mechanism, the European Stability Mechanism to replace (ESM ), which is to remain in force after 2013.

Relation to non- assistance clause

The problem with the European Stability Mechanism is its relationship to non- assistance clause in Article 125 TFEU, which excludes any liability of Member States or the European Union as a whole for the debts of other Member States. In order to justify the provisional stabilization mechanism later Article 122 TFEU was led that allows financial assistance to a Member State if that " affected due to natural disasters or exceptional occurrences beyond its control in difficulties or seriously threatened with severe difficulties " is. Under pressure from the non- euro country Britain was enforced that only stick the other euro countries with loans for countries which are members of the euro zone. However, can be recorded as balance of payments support for non- euro countries loans, shall be liable for all the Member States of the EU.

With regard to the ESM, which is the successor structure of the EFSF, the European Court has, however, denies any breach of Article 125 TFEU in its judgment in Case C-370/12 Thomas Pringle / Government of Ireland, Ireland, The Attorney General case: " The ban on the ECB and the central banks of the Member States, bodies and bodies of the Union and the Member States to grant overdraft facilities or any other type of credit facility or directly from them to purchase debt securities, will not be circumvented by the ESM. This ban is aimed namely specifically to the ECB and the central banks of the Member States. If one or more Member States afford another Member State either directly or through the ESM financial assistance, this does not fall under that prohibition. using the " non- assistance clause " according to which the Union or a Member State not for the liabilities of another Member State enters and is not liable for them, the Union and the Member States should not be prohibited from any form of financial assistance of another Member State. It aims to ensure that Member States pay attention to a sound fiscal policy, by ensuring that Member States remain subject in their debt market logic rather. It does not prohibit the fact that one or more Member States, a Member State which is responsible for its own liabilities to its creditors, make a financial contribution, provided that the terms thereof are adapted to move him to sound fiscal policy. The ESM and the participating Member States but are not liable for the obligations of the Member State receiving a stability support and also do not occur in the sense of "non- assistance clause " for them. "

Actions before the German Constitutional Court

Against the Law stabilization mechanism by which the participation in the EFSF had been decided several cases before the Federal Constitutional Court were raised in Germany. Special attention has been brought by the scientist Joachim Starbatty, Wilhelm Hankel, Karl Albrecht shaft Schneider, Wilhelm Nölling and manager Dieter Speth man as well as the action of the politician Peter Gauweiler. The complaints were directed against both the German approval of the EFSF, as well as against the Monetary Union Financial Stability Act, which governs the German participation in the auxiliary loans for Greece. These loans for Greece took place before the establishment of the EFSF, but had a similar operation as that which is provided in the EFSF. The case was accepted for decision the hearing was held in July 2011. The plaintiffs argued, inter alia, relying on the non- assistance clause that the German Bundestag had not been sufficiently involved and the European Union will help Greece through a " liability and transfer company ".

On September 7, 2011, the Federal Constitutional Court rejected the constitutional complaints of scientists and MPs Gauweiler. With the amount of guarantees, no upper limit is exceeded. This would only be the case if the budgetary autonomy of the Bundestag "for a significant period of time would not only restricted but practically completely empty would run ". However, the court strengthened in its judgment the participation rights of the German Bundestag. Future grants coupled judges to the requirement that the budget committee of the German Bundestag must approve any new rescue package. On 27 October 2011, the Federal Constitutional Court issued an interim order that Parliament may not delegate to the so-called 9- special committee 's responsibility.

In a dispute between organs, the Federal Constitutional Court ruled on 28 February 2012, that § 3, paragraph 3 of the stabilizer law violates the Bundestag in their rights under Article 38, paragraph 1, sentence 2 of the Basic Law, " as it applies not only to purchases of government bonds, the European Financial Stability Facility in the secondary market makes. "

Background

Establishment of temporary stabilization mechanism

The establishment of a temporary stabilization mechanism was adopted at a special meeting of European finance ministers council in the night of 9 in the wake of the Euro crisis on 10 May 2010. This was preceded by the Greek financial crisis, which had led on 25 March 2010 on an emergency plan under which Greece each bilateral loan guarantees from the other euro countries and the International Monetary Fund were granted totaling around 110 billion euros. However, shortly after this emergency plan, the interest for the economically weaker countries sharply higher again, so that new measures appeared necessary.

The German government under Angela Merkel suggested as solutions initially the exclusion of over-indebted states from the European Monetary Union and the establishment of a state insolvency order before, so a regulated process by which an over-indebted country would not have to repay part of its debt. Both proposals were rejected by other Member States. After the U.S. Treasury Secretary Timothy Geithner had urged his G7 colleagues on 7 May 2010 for an early resolution, finally agreed and Germany at the summit on 9-10. May 2010 on setting up a " stabilization mechanism ". This arose mainly on French insistence, and under massive time pressure, over one weekend, because those involved wanted to adopt him before the opening of the Tokyo Stock Exchange on 10 May 2010 by 2 clock European Time. In Germany, the state election in North Rhine -Westphalia had ended on 9 May 2010 by 18 clock. The stabilization mechanism it was based on Article 122 TFEU, which provides that the Council a Member State, the " affected due to natural disasters or exceptional occurrences beyond its control difficulties or is seriously threatened with severe difficulties " are " under certain conditions may grant Union financial assistance. "

The day after the decision, the risk premiums on government bonds of crisis, such as Greece and Spain fell first. Silvio Berlusconi said: "If the house is burning, it does not matter where the water comes. I am very pleased with this evening, France and Italy have prevailed. "

In the following night, more resolutions were passed on the details in a further special meeting of EU finance ministers in the Council of Economics and Finance. The entry into force of the Stabilisation Mechanism corresponding laws were passed in the individual euro area countries in parallel; so the German Bundestag decided on 21 May 2010 the Law on takeover of warranties as part of a European stabilization mechanism. To a blockade it came to Slovakia, where the ESM campaign issue for the general election on 12 June 2010. On July 16, 2010, however, the new Slovak government under Iveta Radicova approved the bailout.

In the provisional version of the European stabilization mechanism of guaranteed loans was a total of 750 billion euros, which are fed by three different " pots ":

60 billion euro, Member States may be provided in a debt crisis from the budget of the European Union.
More 440 billion come from the European Financial Stability Facility (EFSF), a special purpose entity that receives funds on the capital market, are liable for the Member States of the euro zone with different proportions of the euro zone common; actually seen the EFSF is now a bank, with limited guarantor liability that is not related to her (credit) capital from (savings ) deposits, but takes on ( corporate) bonds. The respective proportion depends on the proportion of capital held of States in the European Central Bank, which in turn results in each half of the population and the gross domestic product of the Member States. For Germany, this results in a stake of around 28%, which corresponds to a first commitment of up to 123.2 billion euros. When unforeseen and unabweisbarem required, the warranty authorization - but are exceeded by 20 percent, resulting in a maximum commitment of around 148 billion euros would result for Germany - with the consent of the Budget Committee of the German Bundestag.
Other loans totaling around 250 billion euros may optionally be provided by the International Monetary Fund ( IMF). Involved are of the euro zone member states of the IMF Germany with 5.98%, France 4.94 %, Italy 3.24 %, Netherlands 2.37 %, Belgium 2.12%, Spain 1.40 % equity interest.

In any case, it is in these support services to credit; the country concerned, it must therefore pay back later. The measures agreed in the ESM interest rates should be significantly lower than those who would have to pay the land on the open market. For this, the country agreed with the EU and the IMF on a program of economic reform, should be prevented by the future debt crises.

The temporary stability mechanism would remain in force until 30 June 2013.

Structure and resources

Shareholders of the EFSF are the Member States of the Euro Group. Your governing body is a Board of Directors, which consists of one representative per state. As Managing Director of German Klaus Regling was appointed on 1 July 2010, who had led from 2001 to 2008, the Directorate General for Economic and Financial Affairs of the European Commission. After 90 % of Member States had ratified the establishment of the EFSF, this was fully entitled to 4 August 2010. The full ratification of the last Member States (Belgium, Slovenia, Slovakia, and Austria ) until early December 2010.

As a service provider for the EFSF occurs the German Finance Agency, which organizes the issuance of the bonds. The loans are passed on to the financially troubled member states, who can no longer finance themselves at affordable interest rates on the capital market. However, any assistance must be preceded by a unanimous decision of the Board, ie all member states of the Euro Group. The credit terms under which the EFSF passes on the credit to the Member States concerned, shall be drawn up by the European Commission. This may include to fiscal consolidation measures, in particular conditions.

To the top rating by the rating agencies for to be awarded by the EFSF bonds - Rating Code AAA - to get the loans are hedged to 120 percent. Every country in the euro zone so liable in the individual issues for 20 percent more than it would correspond to its share according to ECB capital key. Reason for this is that at the time the EFSF foundation only six had a AAA rating of the 16 euro - countries. Without the over-collateralisation an average rating would therefore not result in the top AAA rating, which borrowing would become more expensive by the EFSF. Having established that even a twenty percent excess collateral was not sufficient to achieve a AAA rating over the full loan amount of 440 billion euros, end of March 2011 was again decided to expand the EFSF. This expansion, with which also increased the guarantees provided by Germany, the Bundestag voted by a large majority on September 29, 2011. Slovakia rejected the reform only one of the 17 countries in the euro zone on October 11, 2011 first off, causing the expansion was initially stopped. In a second vote on October 13, 2011, however, spoke of a majority of MPs from government parties and the opposition for reform.

On 25 January 2011 the EFSF issued its first bond with a volume of 5 billion euros, a term of 5 years and an initial yield of 2.89%. The volume obtained was placed Ireland are available. In August 2012, the EFSF could borrow at negative interest rates.

At a special meeting of the European Council on 21 July 2011, a reform of the EFSF was decided by which these can also buy up government bonds of indebted countries in the secondary market if the 17 Member States of the euro zone to agree.

To increase the effectiveness of the EFSF to multiply its effect by a loan lever on at least one trillion euros and thus be able to provide more money for the fight against the debt crisis, agreed to the German Bundestag still on 26 October 2011, the date of the so-called euro crisis summit in Brussels, with the votes of all the groups - except those of the Left - a joint Statement on the euro rescue fund EFSF. Basis of the coordination arrangements were in Brussels of finance ministers, such as the " lending capacity of the EFSF " can be maximized.

On November 26, 2011 Der Spiegel: "According to SPIEGEL information of the EFSF is a lot smaller base. Reluctance of donors Paris and Berlin are working in the field of crisis is now on a new Euro Treaty.. " " The attempt to pry the remaining funds of the EFSF amounting to 250 billion euros to this sum, is immediately before the failure. During the meeting of the Euro Group early next week will EFSF chief Klaus Regling, the finance ministers therefore present two variants. Therein it goes only to the doubling, tripling at most of the remaining funds -. 500 or so to more than 750 billion euros "

Participation of Member States

The states are each involved both on warranty to the EFSF and on its share of the International Monetary Fund in the financing. In no case, however, are directly additional funds: The EFSF guarantee could be called only when the EFSF itself is not able to repay their borrowings (which is only the case if the Member States, which supported by the EFSF are, were, despite their help insolvent ). The IMF loan in turn is paid from the regular budget of the IMF, the EU Member States - as well as the other IMF member countries, especially the USA as a major financier - are already involved in its share at the IMF.

Grants

The EFSF awarded before transfer of responsibility to the European Stability Mechanism ( ESM) loans to Greece, Ireland and Portugal.

Greece

The first Greek bailout, the EFSF was not involved. This support was made exclusively by the EU and the International Monetary Fund, among others in the form of bilateral loans and guarantees.

For the second Greek aid package in 2014 from 144.6 billion euros the EFSF are pledged to December 31, of which up to 31 December 2013 133 600 000 000 already have been retrieved.

Ireland

In November 2010, Ireland have pledged a total of 85 billion euros aid, of which up to December 8, 2013 [ deprecated] are 17.7 billion available through the EFSF. Until November 22, 2013 thereof 15.4 billion had already been retrieved.

Portugal

In May 2011, Portugal was pledged 78 billion euros aid. These consist of 26 billion from EFSF, EFSM and IMF. Of the available until May 18, 2014 26 billion of the EFSF to November 22, 2013 24.8 billion had already been taken.

Spain

Spain has agreed to accept funds from the EFSF to complete. In July 2012, the Bundestag and the Euro Group approved the 100 billion euro rescue package for the stabilization of the banking sector. The EFSF held a reserve of 30 billion euros available, but has not been retrieved. Beginning in December 2012 provided a specific request for assistance in the amount of 39.5 billion euros, which were shortly thereafter granted by the ESM to the Spanish Fund for the bank bailout Spain FROB.

Cyprus

Cyprus has agreed to accept funds in height of 4 to 10 billion euros from the EFSF to complete. Of the 9 billion euros allocated to May 20, 2013 2 billion had been paid out over the ESM.

Slovenia

Slovenia also has been traded since the summer of 2012 in the media as a candidate for the euro bailout fund. By the end of 2013, Slovenia has, however, taken no euro helps to complete, neither the EFSF nor the ESM is now responsible for lending.

Criticism

Germany

Criticism of state institutions

The Bundesbank warned in an official statement of 19 September 2011: " [ ... ] With the decisions of the Heads of State and Government of the euro area and the EU institutions on 21 July 2011 changes to the reform plans were again at key points made. It was decided to significantly expand the toolbox of the EFSF ( and the future ESM). [ ... ] These decisions followed by a further big step towards joint liability and lower discipline of the capital markets without the control and influence over national fiscal policies will be felt increasingly in return. "

Other criticisms

The introduction of the European Stability Mechanism was, among other things criticized by the Ifo Institute for Economic Research, whose president Hans -Werner Sinn warned that the rescue package for Germany, " an unpredictable adventure " and " a safe brake on growth " performing. It held, among other things, that Germany de facto liable for the debts of other euro countries and thereby take over the funding costs for the German state would rise. He advocates the controlled termination of transfers billion in needy countries and criticized the Federal Government and the Bundestag sure to weaken through benign neglect to the demand for unique credit terms the euro and jeopardize the European project.

The Chairman of the Foundation Governance and the Centre for European Politics, Luder Gerken, criticized that the stability mechanism, the core of the problem of the Southern European countries does not cover: This does not lie in the national debt alone, but in the indebtedness of the overall economics due to the sustained current account deficit. This could only be countered by real economic reforms. Such reforms are indeed provided in the agreed mechanisms by awarding grants to " strict conditions " is to be linked; Gerken points out, however, that these requirements in practice can not be enforced with the necessary rigor, since the other euro countries could a risk of insolvency Member State hardly fail grants and, therefore, their negotiating position is weakened. Gerken sees in this state delays in necessary internal reforms, the risk of permanent mobilization of the Stability Pact by some countries and considered the measures as - not intended, but executed undertaken - way into the " debt union ".

In particular, the FDP Bundestag member and politician Frank Schaeffler financial vehemently criticized the bailout program. Among other things, he accused the European Council to commit " collective right breaks " the non- assistance clause and an " economic centralization and the boundless primacy of politics over the economy in the European Union " and a "monetary planned economy " as its goal. A FDP membership referendum was prepared by him and other FDP politicians like Burkhard Hirsch. However, the decision subsequently carried out from December 2011 confirmed the course of the party leadership.

Also comes criticism from some CSU politicians such as the Member of Parliament Peter Gauweiler who are not willing to support the government's plan Merkel.

The proposed scheme is generally rejected by the Left Party, since the Left Party 's view on one side state tax funds paid to the international financial institutions are redistributed.

The economist Max Otte criticized the planned European system for a stabilization mechanism for euro - hedging and the position of Chancellor Angela Merkel: " billionaires and oligarchs - these are the actors that we save. '"

At the meeting of EU finance ministers and central bankers in Wroclaw on September 17, 2011 rejected Bundesbank President Jens Weidmann from the bond purchases by the European rescue fund EFSF. The variant to equip the rescue fund with a bank license in order to get at the ECB fresh money for bond purchases, Weidmann negated on the grounds that the political independence of the ECB should not be used to finance government debt, " regardless of whether a detour or direct".

In bipartisan alliance citizens will have thousands of people, including well-known people from science, politics and society, come together to tackle the euro - bailout policy.

Spain

Before agreeing a rescue package of 100 billion euros of the EFSF, the Spanish Parliament passed in July 2012 austerity measures amounting to about 65 billion euros by the year 2015. Against the increase in the sales tax by 3 percentage points and wage cuts in the public sector protest over 100,000 people in Madrid. In 80 Spanish cities, it also led to protests in which demonstrators acted partly violent.

Federal Constitutional Court of Germany Karl Albrecht Schachtschneider North Rhine-Westphalia state election, 2010 Slovak parliamentary election, 2010 Eurogroup Hans-Werner Sinn Wrocław Handelsblatt

297627