EFSF established as Malta reduces its exposure to Greek bailout

Malta yesterday drastically reduced its exposure to the Greek bailout by approving the setting up of the European Financial Stability Facility (EFSF) mechanism, which replaces the emergency bilateral agreements entered into at the beginning of the financial crisis.

13 July 2011, 12:00am
by Karl Stagno-Navarra

2 min read

Through the EFSF, Malta is to deposit a share capital of €58.4 million in approximately five tranches of €12 million each over five years to the EU fund, while also making available €453 million in guarantees to the EFSF as up-share capital.

The figures on Malta’s contribution to the multi-billion euro fund intended to be the guarantor for any future bailouts, were announced yesterday by finance minister Tonio Fenech at the end of an Ecofin council meeting in Brussels. The guarantees made available have been drastically reduced from the initial €700 million.

The EFSFis a special purpose vehicle agreed by the 27 EU member states, aimed at preserving financial stability in Europe by providing financial assistance to eurozone states in economic difficulty.

TheEFSF can issue bonds or other debt instruments on the market 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.

Meanwhile, leaders of the 17-nation euro zone have 'not excluded' holding an emergency summit on the spiralling debt crisis, although no decision has been made, EU president Herman Van Rompuy said.

“No decision has been taken on a summit of the euro zone but it has not been excluded,” he told a news conference in Madrid following talks with Spanish Prime Minister Jose Luis Rodriguez Zapatero.

Italian Prime Minister Silvio Berlusconi urged parliament in Rome to adopt sweeping budget cuts quickly, as Italy and Spain moved to stem financial market contagion from Greece's debt crisis spreading.

“We are on the frontlines in this battle,” Berlusconi said in a statement, calling for austerity measures to be approved in “a very short time frame, we have to be united and cohesive in the common interest.”

Zapatero, meanwhile dismissed investor jitters, saying Spain's ability to repay debts “has every guarantee.”