European Financial Stablisation Mechanism - EFSM

AAA

DEFINITION of 'European Financial Stablisation Mechanism - EFSM'

A permanent fund created by the European Union (EU) to provide emergency assistance to member states within the union. The European Financial Stablisation Mechanism (EFSM) raises money through the financial markets, and is guaranteed by the European Commission. Funds raised through the markets use the budget of the European Union as collateral. The EFSM is rated AAA by Fitch, Moody's and Standard & Poor's.

INVESTOPEDIA EXPLAINS 'European Financial Stablisation Mechanism - EFSM'

European countries have several options outside of the open market to seek financial help. Other than the European Financial Stablisation Mechanism starting in 2013, The EFSM has been supported in the past by other organizations such as the European Financial Stability Facility (EFSF) and the International Monetary Fund (IMF).


Member states of the European Union may support the various funding mechanisms because - while they may potentially give rise to domestic political fallout - they may prevent a domino effect in which other stronger countries are dragged down as well.

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. AAA

    The highest possible rating assigned to the bonds of an issuer ...
  4. Special Purpose Vehicle/Entity ...

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

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

    A group of European countries that participates in the world ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. Why are financial markets considered to be transparent?

    Financial markets are considered transparent due to the fact it is believed all relevant information is freely available ... Read Full Answer >>
  5. What are the advantages and disadvantages of the International Monetary Fund?

    Established following World War II to help with post-war recovery, the International Monetary Fund (IMF) serves as a lender ... Read Full Answer >>
  6. How does a Foreign Institutional Investor (FII) manage currency risk when investing ...

    A foreign institutional investor (FII) manages currency risks (inflation and exchange rate risk) by using traditional tools ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Sovereign Wealth Funds - Friend Or Foe?

    With $5.86 trillion in assets as of September 2013, SWFs have a great deal of clout in financial markets. But as the majority of SWFs are located in the Middle East and Asia, whether these largely ...
  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. Mutual Funds & ETFs

    An Introduction To Sovereign Wealth Funds

    Countries use sovereign wealth funds to stabilize their economies, but these investments can lack transparency.
  4. Bonds & Fixed Income

    The Risks Of Sovereign Bonds

    Sovereign debt can play an important role in providing international diversification to individual investors.
  5. Taxes

    Should The U.S. Switch To A Flat Tax?

    Some countries have begun charging a flat tax rate instead of the gradual tax system of the Western world.
  6. Entrepreneurship

    Can Business Evolve In A Green World?

    Learn how global warming is starting to heat up America's corporate climate.
  7. Active Trading

    How Does Crude Oil Affect Gas Prices?

    Find out how this commodity's fluctuating price affects more than just how much you pay at the pump.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard International Stock

    Discover how the Vanguard Total International Stock ETF is managed, and learn which investors may find it suitable as part of a diversified portfolio.
  9. Economics

    What Is a Quota?

    In business, quota usually refers to the sales target for a salesperson or a sales team.
  10. Economics

    How Iran Impacts The Price and Supply of Oil

    If Congress approves the deal, Iranian oil will be widely available for the first time in years. When Iranian oil begins to flood the market, it will influence the world oil supply and oil prices ...

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
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!