Eurozone rescue fund nears capital target
Klaus Regling - European Stability Mechanism
(LUXEMBOURG) - A massive rescue fund created to ward off further crisis in the eurozone has reached more than half its capital target and is on pace to become the world's richest financial institution, the European Stability Mechanism said in a statement on Wednesday.
"Thanks to the contributions of our Member States the ESM has a very robust capital structure", said Klaus Regling, Managing Director of the ESM.
"As foreseen, the 17 Member States of the euro area transferred the third tranche of paid-in capital to the ESM by 30 April 2013," he said.
The ESM is a crucial piece of the effort by eurozone countries to bring an end to the three year old crisis.
It is designed to shield the eurozone's most fragile governments from single-handedly recapitalising their country's teetering banks, which has seen public deficits balloon destabilising world markets.
Regling said eurozone member states had boosted their capitalisation of the war chest to 48 billion euros with two remaining tranches to be paid in October and April next year.
"Upon payment of the final tranche, the ESM will have a paid-in capital of 80 billion euros, becoming the international financial institution with the highest paid-in capital worldwide," Regling said.
In a year the ESM will have reached a lending capacity of 500 billion euros, he said, not counting an existing 192 billion euros in commitments to the ESM precursor, the European Financial Stability Facility.
The ESM is a permanent rescue fund and only came into being after a challenge at the German Constitutional Court was rejected last summer.
Full operation of the ESM however still awaits the creation of an EU-wide banking supervisor.
In March the European Parliament and Ireland, as rotating president of the EU, set out a broad plan for banking supervision putting it under the authority of the European Central Bank, but the effort still requires the approval of the 27 member states, where resistance to some key provisions remains strong.