STOCK MARKET WATCH -- Tuesday, 24 January 2012

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56. EU Reaches Agreement on Permanent Bailout Fund

http://www.spiegel.de/international/europe/0,1518,811053,00.html

The 17 euro-zone countries have reached agreement on the contract for the permanent euro bailout fund, the European Stability Mechanism (ESM), clearing the way for the aid fund to be launched one year earlier than planned. Luxembourg Prime Minister Jean-Claude Juncker, chairman of the group of euro-zone finance ministers, announced the agreement following a Monday night meeting in Brussels. The ESM is now set to replace the temporary European Financial Stability Facility (EFSF) on July 1, a year earlier than originally planned.

"I believe this is an important achievement," said German Finance Minister Wolfgang Schäuble after the meeting. "It demonstrates that the euro group and the European Union as a whole is capable of taking the necessary steps."

Schäuble also said that agreement had been reached on the euro-zone fiscal pact, which would submit members of the common currency zone to stricter budgetary rules. "We aren't yet over the mountain," Schäuble said in reference to the ongoing euro-zone debt crisis. But he said there is "cause for optimism."

The ESM will be funded with €500 billion to help struggling euro-zone countries, with Germany providing the largest share -- although Angela Merkel's recent refusal to consider upping that figure seems to be wavering under heavy pressure.