A bit more from last night’s European Fin-Min teleconference:
European Union finance ministers failed to agree Monday to raise the ceiling of funds that can be held at any given time by the euro area’s transitional and permanent rescue funds, an EU official said Monday.
The 27 finance ministers were in a teleconference that lasted some four hours and focused on efforts to raise bilateral loans to the International Monetary Fund, but finalizing the operational details of the European Stability Mechanism, or ESM–the permanent rescue fund–was also on the agenda.
“There is no agreement to raise the joint ceiling for the (European Financial Stability Facility) and the ESM above EUR500 billion,” the EU official told Dow Jones Newswires after the teleconference had concluded late Monday.
There had been hope that the two funds could run alongside each other for a period of time in 2012, and that the EUR500 billion limit of funds would apply only to the ESM, leaving the EFSF–the transitional fund–leeway to hold its own endowments independently of that ceiling.
“The two funds can run alongside one another but the limit won’t be raised,” the official said.
The finance ministers also failed to make a decision on the question of how the ESM voting rules would work. After an EU leaders’ summit on Dec. 9, there had been a move to waive previously held unanimity rules and to allow the ESM to make decisions on the base of an 85% supermajority, affording it the ability to act faster, even if some euro-area countries disagreed.
But the 85% voting rules was blocked Monday by Finland, the EU official said.
Given there is likely to be quite a bit of chatter on the net and in the blogosphere about all things “European stability” over the Christmas and New Year’s break I thought I would post up some relevant documents. I have already seen some misguided comments on other sites and forums about what these agreements actually contain, so I thought it would be a good idea to get the facts so MacroBusiness readers are well informed.
Firstly the latest statements on the IMF loan agreement.
And yes that is the same Spain and Italy that may well turn from donor to recipient over the course of next year.
Secondly is the ESM treaty document which I believe has already been somewhat misrepresented up on ZH.
You may note that although the fin-min meeting could only agree on a 500 billion Euro lending capacity for the combined ESM/EFSF the ESM actually has “technical” capital stock of 700 billion euros. I say “technical” because the fund is supposed to consist of 80 billion euros of paid-in capital, which isn’t actually paid-in at all, and 620 billion Euros of callable shares. Just don’t ask exactly where they are callable from!
And last, the latest EFSF legal documentation which, given the mechanism and the outcome of the meeting, seems a little irrelevant at this point.