European Stability Mechanisms discussed in EU

Euro zone finance ministers promised longer debt maturities and a more flexible rescue fund to help Greece and other EU debtors, but they set no deadline to act and the threat of contagion to Italy and Spain grew, the Reuters reports.

The statement singled out the ECB as opposing a “credit event or selective default.” Luxembourg Prime Minister Jean- Claude Juncker, the meeting’s chairman, said this doesn’t mean that European governments “would do everything in order to provoke a credit event.”

Finance ministers also signed a treaty to establish the European Stability Mechanism, which will replace the temporary fund in mid-2013 and include provisions for a private-sector role.

Euro-area governments will put 700 billion euros of cash and callable capital into the ESM, giving it the capacity to lend 500 billion euros. It requires unanimous government ratification to go into operation, the Bloomberg says.