2010: Euro safety net 2 minutes spent reading

2010: Euro safety net

Volkmar Held

A package of fiscal measures that was decided upon by the eurozone countries in 2010 supported the stabilization of countries with high sovereign debt and the entire eurozone.

In late 2009, the 27 EU states had an average budget deficit of 7.2%. The eurozone countries Greece, Ireland, Spain, and Portugal had a particularly high level of national debt.

Threat of bankruptcy

euro lifesaverGreece faced a particularly high debt burden. Its total national debt was 125 percent of its gross domestic product, more than double the amount permitted according to criteria stipulated in the EU treaty. Rating agencies classified the country and its financial products as “junk.” Therefore, it became almost impossible for Greece to obtain fresh money. To support economies with high levels of debt and the joint currency, the eurozone countries implemented fiscal measures, widely known as the “rescue package,” that came into effect in May 2010.

The euro safety net

The first joint bail-out packages soon proved inadequate—especially in the case of Greece. Therefore, the eurozone states agreed on 10 May 2010, to implement a rescue package. Combined, the “European Financial Stabilization Mechanism” (EFSM) and the “European Financial Stability Facility” (EFSF) were worth up to EUR 750 billion. Later additions and subsequent packages were the “European Stability Mechanism” (ESM) and finally the “European Fiscal Pact.”

The results

The measures under the rescue package initially stabilized the markets. Most of the European states with a high level of sovereign debt were able to settle their financial situation down. The prices of industrial shares recovered and began to climb. In the year after the implementation of the rescue package, the voestalpine share rose by more than 60 %.

Two decades ago voestalpine AG started out on its path to becoming a privatized and exchange-listed company. The ‘IPO 199520 years on the stock exchange’ series describes key events on the path to becoming an internationally successful steel-based technology and capital goods group.
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