European Financial Stability Facility - EFSF

AAA

DEFINITION of 'European Financial Stability Facility - EFSF'

An organization created by the European Union to provide assistance to member states with unstable economies. The European Financial Stability Facility is a special purpose vehicle (SPV) managed by the European Investment Bank, a lending institution. The fund raises money by issuing debt, and distributes the funds to eurozone countries whose lending institutions need to be recapitalized, who need help managing their sovereign debt or who need financial stabilization.

INVESTOPEDIA EXPLAINS 'European Financial Stability Facility - EFSF'

European countries have several options outside of the open market to seek financial help. Other than the European Financial Stability Facility, European countries can seek money from European Financial Stabilization Mechanism (EFSM), which is guaranteed by the European Union's budget, or the International Monetary Fund (IMF). These funding mechanisms are supported by the EU because, while not all countries have debt problems, the failure of one European economy can have a widespread effect on the health of other economies. Starting in 2013, the EFSF will be replaced by the ESM, or the European Stability Mechanism.

RELATED TERMS
  1. Sovereign Debt

    Bonds issued by a national government in a foreign currency, ...
  2. Recapitalization

    Restructuring a company's debt and equity mixture, most often ...
  3. Special Purpose Vehicle/Entity ...

    1. Also referred to as a "bankruptcy-remote entity" whose operations ...
  4. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. ...
  5. European Union - EU

    A group of European countries that participates in the world ...
  6. Optimal Currency Area

    The geographic area in which a single currency would create the ...
RELATED FAQS
  1. How will a value added tax impact the government budget?

    In 1992, the Congressional Budget Office conducted an economic study on value-added tax, or VAT. At the time, the CBO concluded ... Read Full Answer >>
  2. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  3. How do I evaluate a debt security?

    Debt securities are a form of loan from an investor to the government or a business. Among the many different types of debt ... Read Full Answer >>
  4. What are the differences between B-shares and H-shares traded on Chinese stock exchanges?

    Equity listings in China generally fall under three primary categories: A shares, B shares and H shares. B shares represent ... Read Full Answer >>
  5. What are the differences between H-shares and A-shares on Chinese and Hong Kong stock ...

    Publicly trade companies in China generally fall under three share categories: A shares, B shares and H-shares. A-shares ... Read Full Answer >>
  6. What austerity measures can a country implement to curtail government spending?

    Broadly speaking, there are three types of austerity measures. The first is focused on revenue generation (higher taxes), ... Read Full Answer >>
Related Articles
  1. Insurance

    Liquidity And Toxicity: Will TARP Fix The Financial System?

    TARP is the government's attempt to forestall a deep, extended recession. Will it work?
  2. Credit & Loans

    How Countries Deal With Debt

    For many emerging economies, issuing sovereign debt is the only way to raise funds, but things can go sour quickly.
  3. Bonds & Fixed Income

    The Risks Of Sovereign Bonds

    Sovereign debt can play an important role in providing international diversification to individual investors.
  4. Economics

    How Governments Influence Markets

    The biggest influence in the markets today can create some unintended consequences.
  5. Bonds & Fixed Income

    Bailout Acronyms 101

    The subprime meltdown gave rise to a mouthful of financial acronyms. Learn how to sort through this alphabet soup.
  6. Active Trading Fundamentals

    The Fall Of The Market In The Fall Of 2008

    How did America's strong economy tumble so quickly? Find out here.
  7. Economics

    Top 4 Ways to Invest in Chinese Bonds

    Investing in Chinese bonds isn't easy, but it is possible. Here's how.
  8. Personal Finance

    Why Best Buy Failed in China

    Best Buy entered China with much fanfare in 2006. The Minnesota-based retailer exited quietly last year. What went wrong?
  9. Economics

    Can Fracking Survive at $60 a Barrel?

    Can fracking survive at $60 a barrell?
  10. Personal Finance

    Is Amazon Killing the Best Buy Business Model?

    Best Buy's business model has been shaken up by Amazon. Its plan to adapt is working but needs to go further to avoid the end of Best Buy.

You May Also Like

Hot Definitions
  1. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  2. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  3. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  4. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
  5. Touchline

    The highest price that a buyer of a particular security is willing to pay and the lowest price at which a seller is willing ...
  6. Himalayan Option

    An exotic equity option belonging to a class known as mountain range options. Himalayan options are based on a basket of ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!