European finance ministers gathering for the first time this year begin the long march to enacting policies they promised to subdue the debt crisis, beginning with how to channel firewall funds directly to banks.
At a meeting in Brussels today, where an assessment of Spain, Cyprus and Greece will feature, euro-area ministers are likely to clash over how and when the 500 billion-euro ($666 billion) European Stability Mechanism can bypass governments and provide direct help to banks.
With officials declaring the worst of the region’s three- year market emergency over, finance ministers are debating whether the ESM should take over earlier bank bailouts that were routed through governments and what to do with so-called legacy assets. A European Union aide who briefed reporters defined those as loans already on a bank’s balance sheet that could cause problems in the future.
The actual amount of ESM funds available for direct aid to banks may be less than 100 billion euros because the fund needs to fulfill its main mission of lending to governments that lose market access. Bank aid may also require additional set-asides for the ESM to maintain a high credit rating.
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