Euro fund reportedly to cost Germany up to €25 billion

Euro fund reportedly to cost Germany up to €25 billion
photo: DPA
Germany will contribute up to €25 billion to the European Stabilization Mechanism, the daily Süddeutsche Zeitung reported on Wednesday. The fund planned for 2013 aims to protect the euro from future financial crises.

The newspaper, which based the report on sources within the governing coalition, reported that an initial principal amount of €80 to €100 billion for the fund was likely. The amount was necessary so that the rescue fund would receive a AAA credit rating from the big rating agencies.

A high credit score is necessary so that the fund can borrow on the credit markets at the best-possible rates.

“If that much capital is really needed, then we have to assume that Germany will have to take on from €18 to €25 billion,” a source told the news agency DAPD.

The European stability mechanism (ESM) is the permanent institution that will take over crisis management of the eurozone in 2013 from the Commission’s temporary European Financial Stability Facility (EFSF), which was created in the wake of the Greek debt crisis. The new fund is considered crucial to ensuring the long-term viability of Europe’s single currency.

The ESM will have an overall effective lending capacity of €500 billion.

A final decision on the ESM will be made at a meeting of EU leaders at the end of next week.

DAPD/The Local/kdj

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