Oct.08 - The 500 billion euro fund was inaugurated at the start of a two-day eurogroup meeting, with Spain and Greece topping the agenda. Joanne Nicholson reports
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The euro zone finally has its permanent bailout fund in place.
And first to take a share from the pot is likely to be Spain.
It would need 40 billion euros to save its floundering banking sector.
Morgan Stanley's head of European fx strategy, says the markets will welcome the European stability mechanism:
(SOUNDBITE) (English) IAN STANNARD, HEAD OF EUROPEAN FX STRATEGY, MORGAN STANLEY, SAYING:
"I believe the fact that these entities are now coming into operation and that these rescue plans are available will provide some stability in the periphery of Europe and we're likely to continue to see asset markets stabilize."
Euro zone finance ministers launched the 500 billion euro fund at a meeting in Luxembourg.
It's taken two years to inaugurate but Eurogroup chairman Jean Claude Juncker called it an "historic milestone".
(SOUNDBITE) (English) EUROGROUP PRESIDENT, JEAN-CLAUDE JUNCKER, SAYING:
"The Euro area now is equipped with a permanent and effective firewall, which of course is a crucial component in our comprehensive strategy to ensure financial stability."
The ESM's predecessor, the EFSF has already lent 190 billion euros to Greece, Ireland and Portugal.
And many feel the ESM won't have enough cash to save the euro zone.
It will hold 80 billion of paid-in money, and the rest - 620 billion - will be callable capital.
The ESM will borrow money against this on the market to lend it on to governments.
It will reach its full capacity by 2014.
Robert Halver from Baader Bank says the upbeat mood will have a positive effect on the German stock market
(SOUNDBITE) (German) ROBERT HALVER, TRADER WITH BAADER BANK, SAYING:
"There is money everywhere, including from the ECB and since European politicians pretend there is some kind of honeymoon where everybody loves everybody else, there are no negative aspects for now."
The same cannot be said for Spain or Greece.
Both were on the agenda at the start of the two day meeting
Joanne Nicholson, Reuters
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