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 Sovereign Debt Crisis

    A period of time in which several European countries faced the ...
  3. Sovereign Debt

    Bonds issued by a national government in a foreign currency, ...
  4. Currency Union

    When two or more groups (usually countries) share a common currency ...
  5. Global Financial Stability Report ...

    A semiannual report by the International Monetary Fund (IMF) ...
  6. Stabilization Policy

    A macroeconomic strategy enacted by governments and central banks ...
Related Articles
  1. Markets

    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?
  2. Markets

    The Eurozone Crisis And AAA Ratings

    The eurozone's healthier economies' exposure to weaker economies is threatening their coveted AAA ratings.
  3. Trading

    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.
  4. Markets

    European Banks: Growth in 2016?

    Understand the potential growth drivers of the European banking sector and whether 2016 will be a year of growth or continued stagnation.
  5. Markets

    Can The IMF Solve Global Economic Problems?

    The IMF is an important tool to help struggling countries, but it's not without its problems.
  6. Markets

    Top 4 Central Banks Dominating the World Economy

    Central banks play an integral role in market economies by maintaining the stability and credibility of national currencies used in those economies.
  7. Markets

    What Are The Advantages Of Not Adopting The Euro?

    European Union countries that do not use the euro have a few advantages over eurozone countries. Investopedia explores how.
  8. Trading

    The European Union's Dead Weight

    Greece and the other troubled European Union nations are in need of financial reform.
  9. Managing Wealth

    What Is The Bank For International Settlements?

    Get the scoop on the structure and functions of the oldest global financial institution.
  10. Markets

    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 ...
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. What is the difference between International Monetary Fund and the World Bank?

    Learn about the International Monetary Fund and the World Bank and how they are differentiated by their respective functions ... 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 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 >>
  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. Where does a hedge fund get its money?

    Learn how a hedge fund is structured and how the managing partner of the fund goes about the process of finding and soliciting ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center