Bloomberg News

Euro Area Set to Agree June 20 on ESM Direct Bank Aid, Rehn Says

June 19, 2013

Euro-area finance ministers probably will agree tomorrow on the terms for allowing the European Stability Mechanism to recapitalize banks directly, Europe’s economy chief said.

European Union Economic and Monetary Affairs Commissioner Olli Rehn predicted a deal on the matter by finance ministers from the 17 euro nations, the so-called eurogroup, when they meet on June 20 in Luxembourg.

“I expect the eurogroup to agree on the principles and rules of a direct-recapitalization instrument for the ESM tomorrow,” Rehn told a conference today in Brussels.

The goal of allowing the 500 billion-euro ($669 billion) ESM, the euro area’s permanent rescue fund, to infuse lenders with emergency aid directly rather than via national governments is tied to plans for a European banking union. The direct-recapitalization option is meant to hasten the end of the three-year-old debt crisis by breaking the link between sovereign debt and banking woes.

Somewhere between 50 billion euros and 70 billion euros might be set aside for direct bank aid via the ESM, which could be able to offer such support starting in autumn 2014, a European official said today in Brussels on the condition of anonymity. The question of retroactivity in relation to direct bank recapitalization remains politically contentious, according to the official.

To contact the reporter on this story: Jonathan Stearns in Brussels at

To contact the editor responsible for this story: James Hertling at

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