The Eurozone nations have begun to set up a massive bailout fund worth 750 billion EUR (around 1 trillion USD) that could be used to rescue any member of Europe 's currency union from financial dangers.
The financial rescue package was officially established after the financial ministers from 16 eurozone nations agreed upon the final provisions for the fund during a meeting in Luxembourg in June 7.
The fund is ready and can be lent to any eurozone nation in debt and risking default, said Luxembourg ’s Prime Minister Jean-Claude Juncker, who led the talks.
The fund helps to counter investor’s fears that Spain , Portugal and others could follow Greece by requiring a bailout to meet debt repayments, he said.
Backed by the European Union (EU) and the International Monetary Fund (IMF), the fund will operate via a mechanism called the special purpose vehicle (SPV).
Accordingly, the EU is able to borrow up to 440 billion EUR from financial markets at soft interest rates and guarantees by eurozone nations to re-lend to indebted member countries.
The European Commission (EC) will contribute another 60 billion EUR to the fund while the IMF will provide 250 billion EUR.
Germany , which will provide the largest chunk of the EU fund, has pressed other eurozone countries to make big budget cuts to reduce the chances of them needing a bailout.
German Chancellor Angela Merkel vowed to “set an example” by laying out plans to save 80 billion EUR in the next four years by axing 15,000 government jobs and delaying several major construction projects.
The eurozone finance ministers also urged Spain and Portugal to build on their current significant and courageous spending cuts that will be needed beyond 2011 together with more progress on structural reforms, such as changes to pensions, welfare benefits or labour systems.
They adopted a joint statement, pledging to make bigger cuts and tax increases if they have to and will also pursue structural reforms to trim down government running costs./.
The financial rescue package was officially established after the financial ministers from 16 eurozone nations agreed upon the final provisions for the fund during a meeting in Luxembourg in June 7.
The fund is ready and can be lent to any eurozone nation in debt and risking default, said Luxembourg ’s Prime Minister Jean-Claude Juncker, who led the talks.
The fund helps to counter investor’s fears that Spain , Portugal and others could follow Greece by requiring a bailout to meet debt repayments, he said.
Backed by the European Union (EU) and the International Monetary Fund (IMF), the fund will operate via a mechanism called the special purpose vehicle (SPV).
Accordingly, the EU is able to borrow up to 440 billion EUR from financial markets at soft interest rates and guarantees by eurozone nations to re-lend to indebted member countries.
The European Commission (EC) will contribute another 60 billion EUR to the fund while the IMF will provide 250 billion EUR.
Germany , which will provide the largest chunk of the EU fund, has pressed other eurozone countries to make big budget cuts to reduce the chances of them needing a bailout.
German Chancellor Angela Merkel vowed to “set an example” by laying out plans to save 80 billion EUR in the next four years by axing 15,000 government jobs and delaying several major construction projects.
The eurozone finance ministers also urged Spain and Portugal to build on their current significant and courageous spending cuts that will be needed beyond 2011 together with more progress on structural reforms, such as changes to pensions, welfare benefits or labour systems.
They adopted a joint statement, pledging to make bigger cuts and tax increases if they have to and will also pursue structural reforms to trim down government running costs./.
