The Incomplete Currency

Chapter 7Financial Assistance and Fiscal Agreements in the Eurozone

In this chapter we will examine some of the measures that the European institutions have put in place to address the crisis. These measures have been deployed in two main directions. On the one hand there was the management of the “emergencies” by setting up specific bodies responsible for providing financial assistance to distressed countries. On the other hand the interventions of the European institutions have dealt with the revision of the fiscal discipline to which Eurozone countries must comply, introducing a complex system of rules designed to ensure the soundness of the public finances in order to prevent or to promptly correct any deviation from what is considered a viable path towards the financial stability of each member country.

7.1 The Sovereign Bail-out Funds

In order to provide targeted support to countries in difficulty, the Eurozone has intervened with the establishment of so-called “sovereign bail-out funds”. These special funds provide financial assistance in various forms (for example, through the disbursement of loans or through support during the placement of new issues of government bonds) to the countries benefiting from the aid programme. Concretely, the activities of the sovereign bail-out funds are made possible by their ability to raise funds on capital markets at favourable conditions thanks to the “umbrella” represented by the joint backing provided by the Euro member countries. ...