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Banking

Special focus: European Stability Mechanism (ESM)

Euro-watchers remain on tenterhooks as a pivotal meeting on September the 12th will finally decide whether or not the German Constitutional Court believes that the European stability mechanism (ESM) is constitutional. Read Euromoney's recent coverage of the controversial ESM in anticipation of Germany's ruling. 
ESM definition:
The European stability mechanism (ESM) 
is a proposed permanent rescue fund 
intended to provide financial assistance 
for eurozone members. The ESM plans to
rescue Spanish banks and work with the
ECB
to contain market interest rates.The
ESM would replace the European Financial
Stability Facility (EFSF) and the European
Financial Stabilisation Mechanism (EFSM).
Is the ESM the key to restarting bank lending?
The bestowal on the European Stability Mechanism of a banking licence with a mandate to buy up performing bank loans might prove the boost that eurozone economies desperately need. 

Cracks emerge in ECB's bond-buying plan
The European Central Bank's announcement of a bond buying programme on Thursday needs to address "convertibility risk" premia and fiscal conditionality, analysts say, amid fears over moral hazard.

Who does the EFSF answer to? 
There is a lack of clarity over the procedures that have to be followed to enable European Financial Stability Facility (EFSF) bond purchasing.

German bund 'structural rally' on track despite Moody’s action – analysts
German government bond yields are set to remain at historic lows, even after Moody's changed the sovereign outlook to negative, as collateral and liquidity demand offset the declining creditworthiness of core Europe, claims Nomura. The stakes for fixed-income investors in eurozone sovereign debt are rising. 

More on the ESM
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