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.

  1. International Monetary Fund - IMF

    An international organization created for the purpose of standardizing ...
  2. Sovereign Debt

    Bonds issued by a national government in a foreign currency, ...
  3. Special Purpose Vehicle/Entity ...

    1. Also referred to as a "bankruptcy-remote entity" whose operations ...
  4. Recapitalization

    Restructuring a company's debt and equity mixture, most often ...
  5. European Union - EU

    A group of European countries that participates in the world ...
  6. Trade Credit

    An agreement where a customer can purchase goods on account (without ...
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