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. Special Purpose Vehicle/Entity ...

    1. Also referred to as a "bankruptcy-remote entity" whose operations ...
  4. European Union - EU

    A group of European countries that participates in the world ...
  5. AAA

    The highest possible rating assigned to the bonds of an issuer ...
  6. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. ...
Related Articles
  1. Sovereign Wealth Funds - Friend Or Foe?
    Investing Basics

    Sovereign Wealth Funds - Friend Or Foe?

  2. How Countries Deal With Debt
    Credit & Loans

    How Countries Deal With Debt

  3. An Introduction To Sovereign Wealth ...
    Mutual Funds & ETFs

    An Introduction To Sovereign Wealth ...

  4. The Risks Of Sovereign Bonds
    Bonds & Fixed Income

    The Risks Of Sovereign Bonds

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center