The European Union (EU) finance ministers Tuesday approved a regulation amending the European Financial Stabilisation Mechanism (EFSM) in order to protect non-euro area member states from any risk arising from financial assistance given to a euro area country.
This principle was endorsed on July 17, following the finance ministers of the 28-member bloc have agreed to grant 7.16 billion euros (7.8 billion U.S. dollars) in short term financial assistance to Greece under the EFSM, it said in a statement.
Specifically, the regulation ensures that financial assistance from the EFSM to a euro area member state will only be granted if legally binding provisions are in place.
It is to guarantee that non-euro area member states are immediately and fully compensated for any liability they may incur if the beneficiary failed to repay the financial assistance in accordance with its terms, according to the statement.
The EFSM provides financial assistance to EU member states in financial difficulties. It relies on funds raised by the European commission on the financial markets under an implicit EU budget guarantee.