European rescue funds
The European rescue funds can provide financial assistance to euro countries which are experiencing, or are threatened by, severe financing problems and can no longer borrow money in the financial markets as a result.
Some member states in the eurozone received assistance from a European rescue fund which safeguarded both their own financial stability and that of the eurozone as a whole. This assistance was granted subject to strict conditions.
Permanent European rescue fund
The European Stability Mechanism (ESM), a permanent rescue fund, became operational in October 2012. The ESM is designed to protect the long-term financial stability of the euro area. Any country that joins the eurozone also becomes a member of the ESM.
Since 1 July 2013 the ESM has been the only financial rescue fund for all euro countries. It is now the sole mechanism for responding to new requests for financial assistance. As a result, the activities of the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM) will be gradually wound down. These funds will continue to finance the ongoing programme of assistance to Greece.
The euro countries all contribute to the ESM's capital. They have already paid in €80 billion. The remainder (€620 billion) can be called in if needed.
Strict conditions for ESM support
The ESM can provide support if a country or the eurozone gets into financial difficulties. Countries must satisfy strict conditions to qualify for support, like cutting expenditure and making their economies competitive again.
Loans will be paid out to countries in instalments. The second and subsequent instalments will only be paid after checks have been made that the recipient country has taken the agreed measures and is putting its public finances and economy in order as planned. A joint opinion is given on this question by the International Monetary Fund (IMF), the European Commission and the European Central Bank (ECB). The euro countries themselves also have to give their approval for their part of the loan.
Decision-making on financial support
The ESM's Board of Governors decides whether a member state receives financial support on the basis of an analysis carried out by the European Commission and the ECB.
The Board of Governors is made up of the finance ministers of eurozone countries.
IMF's contribution to European rescue funds
As urged by the Netherlands, the IMF plays an important role in tackling the debt crisis. The IMF contributes by providing loans to the assistance programmes for Greece and Cyprus.