Reuters
June 20, 2011
The euro zone's permanent bailout fund will not have preferred creditor status if it lends to Greece, Ireland or Portugal, but would be paid back first in other cases, euro zone finance ministers decided on Monday.
The European Stability Mechanism (ESM) will come into effect in June 2013, replacing the temporary European Financial Stability Facility that was set up last year. It will have an effective lending capacity of 500 billion euros ($710 billion).
The initial agreement between euro zone countries was that all ESM loans, which will be provided to highly indebted governments in exchange for reforms, would enjoy preferred creditor status, junior only to the International Monetary Fund. EFSF loans are on equal footing with private creditors.
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