“Eurozone finance ministers agreed to give their €500bn bailout fund the power to pump cash directly into teetering banks on Thursday night, but only after national governments share the burden by first making their own capital investment.
“The power to “directly recapitalise” banks through the fund, the European Stability Mechanism, was hailed by leaders as a key achievement to help eurozone countries avoid the fate of Ireland, Spain and Cyprus, where national governments were put at risk of a cut-off from financial markets when they were unable to deal with massive bank bailouts on their own.
“’This instrument will help preserve the stability of the euro area and help remove the risk of contagion from the financial sector,’ said Jeroen Dijsselbloem, chair of the group of eurozone finance ministers who brokered the agreement in Luxembourg.
Klaus Regling, head of the ESM, said he hoped the powers will be ready to use by the second half of 2014, after the European Central Bank and European Banking Authority conduct a series of asset checks and stress tests to determine whether eurozone banks are returning to health.”
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