European Financial Stability Facility

The European Financial Stability Facility (EFSF) is a temporary crisis resolution mechanism that was created in 2010 by Eurozone countries in response to the European sovereign debt crisis.

Its main objective was to offer financial support to Eurozone member states facing significant economic challenges or financial instability.

The EFSF aimed to maintain financial stability within the Eurozone by issuing bonds and other debt instruments in the capital markets, thereby raising funds that could be utilized to provide loans to countries in distress, recapitalize banks, or acquire sovereign debt.

The facility operated according to the European Financial Stability Facility Framework Agreement, which detailed its operational procedures, governance structure, and decision-making processes.

The EFSF was supported by guarantees from the participating Eurozone member states, which determined its total lending capacity.

In 2012, the EFSF was succeeded by the European Stability Mechanism (ESM), a permanent financial assistance institution with a larger lending capacity and a wider array of tools to tackle financial crises.

The ESM was established to enhance the Eurozone’s resilience to financial shocks and to ensure the long-term stability of the European financial system.

While the EFSF no longer initiates new financial assistance programs, it continues to oversee the existing financial assistance packages provided to Ireland, Portugal, and Greece prior to the ESM's establishment.