European Financial Stability Facility

The European Financial Stability Facility (EFSF) is a special purpose vehicle financed by members of the eurozone to address the European sovereign-debt crisis. It was agreed by the Council of the European Union on 9 May 2010, with the objective of preserving financial stability in Europe by providing financial assistance to eurozone states in economic difficulty. The Facility's headquarters are in Luxembourg City, as are those of the European Stability Mechanism.Treasury management services and administrative support are provided to the Facility by the European Investment Bank through a service level contract. Since the establishment of the European Stability Mechanism, the activities of the EFSF are carried out by the ESM.

The EFSF is authorised to borrow up to €440 billion, of which €250 billion remained available after the Irish and Portuguese bailout. A separate entity, the European Financial Stabilisation Mechanism (EFSM), a programme reliant upon funds raised on the financial markets and guaranteed by the European Commission using the budget of the European Union as collateral, has the authority to raise up to €60 billion.

The mandate of the EFSF is to "safeguard financial stability in Europe by providing financial assistance" to eurozone states.

The EFSF can issue bonds or other debt instruments on the market with the support of the German Finance Agency to raise the funds needed to provide loans to eurozone countries in financial troubles, recapitalise banks or buy sovereign debt. Emissions of bonds would be backed by guarantees given by the euro area member states in proportion to their share in the paid-up capital of the European Central Bank (ECB).

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