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Where has all the money gone?

Bernd Riegert / jrb
May 8, 2013

Cyprus is clearing the last hurdles for money to flow from the European rescue fund, ESM. Five eurozone states now have loans for half a trillion euros. Who pays what and who receives the loans?

Life preserver and umbrella as symbol Foto: Patrick Pleul +++(c) dpa - Bildfunk+++
Image: picture-alliance/dpa

Five members of the euro currency union are receiving loans from the eurozone bailout fund, financed by the other 12 eurozone members. On top of that come emergency loans from the International Monetary fund (IMF) and bilateral loans from the solvent states to the bankrupt candidates. Who receives exactly how much to rescue banks and cover government spending? An overview:

Cyprus: 9 billion euros from the bailout fund

The European Stability Mechanism (ESM) will transfer the first 3 billion euros of the agreed 9 billion euros to the Nicosia government this month. The ESM, the permanent bailout fund of the euro currency union, bears the brunt of this most recent bailout. Cyprus will receive another 1 billion euros from the Washington-based International Monetary fund (IMF) into which European Union member states, among many others, contribute. Cyprus will fetch an additional 6 to 10 billion euros from savers and investors who have accounts of more than 100,000 euros with certain ailing banks. Russia has granted Cyprus interest relief for existing loans. Overall, the Mediterranean island has financial obligations totaling 23 billion euros. The ESM rescue fund will initially run for three years.

Greece: the rescue will devour at least 350 billion euros

In several entangled bailouts, the European Union, individual member states and the IMF have promised Greece 240 billion euros. The program, by far the largest, is being handled by the European Financial Stability Facility (EFSF), the temporary predecessor to the permanent ESM. According to the European Commission, the EFSF bailout fund has so far paid out 116 billion euros, with 28 billion euros still remaining. To date, the IMF has paid out 20 billion euros. Through a haircut on its state bonds, Greece fetched 107 billion euros from private sector creditors, so that a total of about 350 billion euros will be raised for the rescue. The current rescue program is financed through the end of 2014. By 2020, Greece is expected to reach a level of debt that is considered "viable."

DW-Grafik: Per Sander
Image: DW

Ireland: 85 billion euros to rescue ailing banks

The rescue program for Ireland expires at the end of 2013 at which point the country is expected to be able to raise capital on financial markets again. Of the 85 billion euros required to put its troubled banking sector back on track, Ireland has raised 17.5 billion euros itself from state assets and pensions. Of the remaining 67.5 billion euros, 22.5 billion is coming from community funds of all EU member states, 12.8 billion from the EFSF bailout fund of the 17 eurozone members, 20 billion from the IMF and 3.8 billion from a Great Britain loan. Nearly 5 billion euros are still available from the EFSF rescue fund.

Portugal: the smallest package

Portugal needs the least help from the international community, based on population. The approved 78 billion euros break down to about 7,000 euros per capita, compared to more than 30,000 per capita in Greece. The loan program for Portugal expires at the end of 2014, when the country expects again to be able to raise capital through bonds on financial markets. Portugal has meanwhile secured more than 60 billion euros from the rescue program. The pledges are evenly distributed among the EFSF, the EU and the IMF, at about 26 billion euros each.

Spain: banks are a special case

To recapitalize its banks that have been battered by a housing crisis, Spain applied for up to 100 billion euros from the ESM bailout fund. The money is not flowing into the state budget but more or less directly to the banks. That's why Spain has not been forced to launch tough eurozone and ESM-backed austerity measures as the other so-called "program countries" Ireland, Portugal, Greece and Cyprus have been forced to do. Spain has so far taken about 41 billion euros of the available 100 billion euros. If Spanish banks fail to pay back the loans, then the government is liable to the remaining 16 euro-zone members as lenders.

Rescue fund is still not empty

Eurozone members receiving assistance from the European rescue fund do not pay into it. That means the higher the assistance, the higher the amount for those states paying into the fund. Germany already guarantees 27 percent of the loans, France 20 percent and Italy 18 percent. The rescue funds have meanwhile distributed 205 billion euros, of which the EFSF has provided 155 million euros and the ESM 50 billion euros.

In April, ESM managing director Klaus Regling confirmed well-filled coffers. Even after all loans are made to Cyprus, the ESM will still have around 90 percent of its fire power, amounting to 500 billion lendable euros, he said. The ESM borrows capital, covered by equity and member state guarantees, on financial markets and then passes it on to the crisis countries with favorable terms. The ESM loans to Greece, for example, run up to 30 years. How, and if, the money will ever be paid back remains to be seen.

Hungary, Romania and Latvia have received emergency loans during the financial crisis. The countries, which are not members of the euro currency union, have received the aid directly from the EU, or the IMF. Hungary has already repaid its loan of 14 billion euros. Latvia will begin paying back its loan of 4.5 billion euros next year. Romania expects to settle its emergency loans totaling 19 billion euros by 2015.