European law

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Luxembourg, 7 June 2010 Terms of reference of the Eurogroup European Financial Stability Facility

In line with the decisions taken on 9 May within the framework of the Ecofin Council to safeguardfinancial stability in Europe, Ministers have established the European Financial Stability Facility as a limited liability company under Luxembourg law (Société Anonyme). To this end, they have agreedon the Articles of Association of the EFSF and on the Framework Agreement between euro area Member States and the EFSF. The objective of the EFSF is to collect funds and provide loans in conjunctionwith the IMF to cover the financing needs of euro area Member States in difficulty, subject to strict policy conditionality. Euro area Member States will provide guarantees for EFSF issuance up to atotal of € 440 billion on a pro rata basis. While the EFSF has been incorporated with Luxembourg as its sole shareholder to expedite its creation, all Member States of the euro area reconfirm theircommitment to enter the capital of the EFSF as soon as possible. National legal procedures to participate in the Facility are well on track. The shareholding of each Member State in the EFSF willcorrespond to its respective share in the paid-up capital of the ECB. The obligation of euro-area Member States to issue guarantees for the EFSF debt instruments will enter into force as soon as a criticalmass of Member States, representing 90% of shareholding, has completed the relevant national parliamentary procedures. The European Financial Stability Mechanism managed by the Commission is alreadyavailable to cover urgent financing needs, if necessary. Ministers have agreed on a number of measures to ensure the best possible credit quality and rating for the debt instruments issued by EFSF, suchas a 120% guarantee of each Member State's pro rata share for each individual bond issue and the constitution, when loans are made, of a cash reserve to provide an additional cushion or cash buffer...
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