New bailout rules for eurozone countries

EU agrees on new rules for future bailouts

Gabriele Steinhauser, AP Business Writer, On Sunday November 28, 2010, 6:58 pm

BRUSSELS (AP) -- European finance ministers agreed Sunday to create a permanent mechanism to solve future debt crises in the 16 countries that use the euro in an attempt to calm fears over the stability of the currency bloc.
The plan falls short of demands from Germany, which had insisted that private creditors -- rather than taxpayers -- should shoulder the costs of any future government bailouts.
The new European Stability Mechanism, which will be launched in mid-2013, could force investors such as banks or hedge funds to take losses if a country runs out of money -- but only after other eurozone nations have unanimously agreed that the country is indeed insolvent.
If a country is deemed to merely face a crisis of liquidity -- that is, it can't access funds quickly enough to repay its debts -- it will get emergency loans similar to those signed off on Sunday for Ireland.
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