Europe Seals Bailout Agreement

European finance ministers have finalized an agreement for the creation of a new bailout fund with a lending capacity of €500 billion to aid eurozone countries struggling with sovereign debts, according to The Wall Street Journal.

European finance ministers have finalized an agreement for the creation of a new bailout fund with a lending capacity of €500 billion to aid eurozone countries struggling with sovereign debts, according to The Wall Street Journal. The new fund will replace the temporary fund, the European Financial Stability Facility, and the replacement will notably require the 17 countries in the eurozone to contribute €80 billion in cash, rather than relying on loan guarantees like the current aid fund. The new fund will begin operating in 2013.

Tying up loose ends of the deal will be the focus of a meeting of European Union leaders later this week. For instance, so far no changes have been made to the current fund, which at €440 in size is effectively limited to a €250 lending capacity by credit rating restrictions. However, Olli Rehn said, “We now have a comprehensive strategy to strengthen the foundations of the euro area and to restore confidence in the euro-area sovereign bond markets.” The agreement comes as Portugal is facing mounting concerns over a potential bailout due to a political crisis that could prevent leaders in that country from completing a new budget with fresh austerity measures.

Click here to read the story from The Wall Street Journal.