EU Sets Up Permanent Debt Crisis Fund

Leaders of the 27 European Union countries, who held their record seventh summit so far this year in the Belgium capital Brussels on Thursday, approved a two-sentence amendment to the EU treaty at Germany's request to pave the way for creation of a European Stability Mechanism (ESM) in an effort to tackle financial crises effective June 2013, Reuters reported, quoting European Council President Van Rompuy.

The ESM, which replaces a temporary European Financial Stability Facility (EFSF) crafted in May, will require changes to EU's Lisbon Treaty, and has stipulated a string of strict measures for granting loans to debt-laden member states, with private sector bondholders sharing the cost of any write-downs.

However, the leaders brushed aside growing concerns that the existing rescue fund needs an increase in order to financially buttress countries such as Spain and Portugal if they plunge into a Greece-style economic bankruptcy.'

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