European Financial Stablisation Mechanism - EFSM

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.

BREAKING DOWN '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. European Financial Stability Facility ...

    An organization created by the European Union to provide assistance ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European ...
  3. Currency Union

    When two or more groups (usually countries) share a common currency ...
  4. Undertakings For The Collective ...

    A public limited company that coordinates the distribution and ...
  5. European Monetary System - EMS

    A 1979 arrangement between several European countries which links ...
  6. Credit Union

    Member-owned financial co-operative. These institutions are created ...
Related Articles
  1. Markets

    What is the European Union?

    The European Union is a group of European countries that participate as one unit in the global economy, and who mostly operate under one currency.
  2. Markets

    How the Brexit Could Affect U.S. Investors

    Learn what Brexit is, who supports and opposes it, and when the referendum is to be held. Discover the possible consequences it may have on U.S. investors.
  3. Markets

    The Top 5 Most Unionized Industries

    Unions don't have the membership numbers that they once did, but they are still a vital part of several different important industries.
  4. Markets

    How Lack Of Leadership Is Making Things Worse In Europe

    Lack of effective leadership is impeding the resolution of economic crisis in Europe.
  5. 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.
  6. Insights

    Netflix Faces New Quota for Local Content in EU (NFLX)

    A new proposal from the European Commission requires streaming video providers to meet a quota for European made content.
  7. 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.
  8. Personal Finance

    What Are Home-Based Credit Unions?

    They’re a far cry from a traditional bank, but that doesn’t mean you shouldn’t park your money there or get a loan – if one meets your needs.
  9. Trading

    Buying Euros as a Long-Term Investment: Risks and Rewards

    Learn about the potential risks and rewards of long term investing in the euro and the current status of the European Union's financial markets.
  10. Markets

    The Trajectory of Europe's Quantitative Easing Program

    The European Central Bank's quantitative easing program aims to save a heterogeneous Eurozone with liquidity for widespread investment.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. What is the difference between a state and a federally chartered credit union?

    Learn how federal chartered credit unions are regulated by the NCUA, while state chartered unions are regulated by their ... Read Answer >>
  4. Does the FDIC cover credit unions?

    Learn whether or not the FDIC insures your funds at a credit union, and what types of insurance are available at the different ... Read Answer >>
  5. Do businesses in states with right-to-work laws have demonstrably less deadweight ...

    Learn more about the economic impact of right-to-work laws and how unions impact production and purchase levels. Explore ... Read Answer >>
  6. 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 >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center