European Financial Stability Facility - EFSF

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.

BREAKING DOWN '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. European Financial Stablisation ...

    A permanent fund created by the European Union (EU) to provide ...
  2. European Monetary System - EMS

    A 1979 arrangement between several European countries which links ...
  3. Currency Union

    When two or more groups (usually countries) share a common currency ...
  4. Marginal Lender

    1. A business that will only provide funds to a borrower in exchange ...
  5. Committed Facility

    A credit facility whereby terms and conditions are clearly defined ...
  6. Sovereign Debt

    Bonds issued by a national government in a foreign currency, ...
Related Articles
  1. Credit & Loans

    5 Eurozone Acronyms Explained

    Confused by all of the new acronyms used by the media to describe the European debt crisis? We can help.
  2. Personal Finance

    The European Central Bank’s Bond Buying Program

    Assisting countries like Greece and Portugal through bond purchase may be a good idea in the short term, but what happens to the ECB in the long term?
  3. 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.
  4. Forex Education

    The Euro: What Every Forex Trader Needs To Know

    Find out the reports and events that determine the euro's worth, and how we can predict movements in its valuation.
  5. Forex Education

    Forex Currencies: The EUR/USD

    By Brian PerryThe United States and the European Union are the two largest economic entities in the world. The U.S. dollar is the world's most heavily traded and most widely held currency. The ...
  6. Economics

    Why These European Countries Don't Use The Euro

    The euro is a common currency of the European Union. Yet, many EU countries don’t use the euro. Investopedia explores why.
  7. Economics

    How Automatic Stabilizers Work

    Many economists claim that automatic stabilizers only work in the short term and question their effect on government spending. In truth, automatic stabilizers do not always have enough impact ...
  8. Forex Education

    Behind The Euro: History And Future

    The euro was designed to create economic parity among eurozone nations. Discover where it's going and where it's been.
  9. Economics

    Countries That Thrive On A Weak European Union

    The current eurozone crisis is having a heavy impact on the global economy and certain nations may leave the EU as a result.
  10. Stock Analysis

    Is Your Portfolio Exposed To This International Risk?

    Lost in all of the global action around Israel and Gaza, Russia and Ukraine and the slow-burning Iraqi civil war, investors have already forgotten about Banco Espirito Santo. This Portuguese ...
RELATED FAQS
  1. How do externalities affect equilibrium and create market failure?

    Learn about the responsibilities of the International Monetary Fund and its functions regarding the international monetary ... Read Answer >>
  2. In what ways does Bayesian probability support the probability default model when ...

    Learn what happened in the European debt crisis. It became a heated argument between the hawks and doves who argued the merits ... Read Answer >>
  3. When and why did the euro make its debut as a currency?

    On January 1, 1999, the European Union introduced its new currency, the euro. Originally, the euro was an overarching currency ... Read Answer >>
  4. What role do SPVs / SPEs play in public-private partnerships?

    Find out why governments and private actors prefer to use special purpose vehicles, or SPVs, when they undertake public-private ... Read Answer >>
  5. Are eurodollars related to the currency called the euro?

    Eurodollars have little to do with the official currency of the European Union, the euro (EUR). In 1999, the euro was implemented ... Read Answer >>
  6. What are the typical day-to-day responsibilities of a Chief Operating Officer (COO)?

    Learn how a country's debt crisis affects the world, including how currency values, inflation and output are affected on ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center