Euro bailout fund to be operational in October: Juncker

NICOSIA (Reuters) - The euro zone's permanent bailout fund will be up and running at the end of next month, the chairman of the Eurogroup of finance ministers said on Friday, two days after Germany's top court gave it the go-ahead.

Eurogroup President Jean-Claude Juncker told reporters that member states would pay 32 billion euros into the European Stability Mechanism (ESM) in two tranches by the end of October, effectively giving it an initial lending capacity of roughly 200 billion euros.

Its board of directors will first meet on the sidelines of the next Eurogroup meeting in Luxembourg on October 8.

Financial markets calmed this week, partly because Germany's constitutional court cleared the way to set up the 500 billion fund, only insisting that parliament be informed sufficiently and have a veto right over any increase in Berlin's contribution.

Juncker said the verdict was not an obstacle for the ESM.

"We all agreed that no provision of the treaty may be interpreted as leading to higher payment obligations for ESM members without prior agreements of their representatives," Juncker told reporters after a Eurogroup meeting.

The group of ministers would issue a statement on how those conditions could be met in the coming days.

The ESM was supposed to come into effect in July as the euro zone's firewall to stop the three-year-old debt crisis from spreading. Only ratification from Germany, which funds more than a quarter of the ESM, was still pending until the court ruling.

Germany's head of state on Thursday signed the treaty but ratification will not be complete until the government meets the conditions set by the top court.

However, finance ministers reached no agreement on the costs at which the European Stability Mechanism (ESM) would make loans, an EU diplomat told Reuters.

Unlike its predecessor, the European Financial Stability Facility, the ESM may charge a penalty margin for its loans to distressed countries. Some northern states, such as the Netherlands, want such a margin to avoid moral hazard, while others insist distressed states should not be punished further.

(Reporting by Annika Breidthardt)