The European Financial Stability Facility (EFSF) was established in May 2010 to manage the €780b of financial aid guarantees made necessary as debt-laden Euro members try to cope with the fall-out from the financial crisis. The Luxembourg based EFSF is part of the wider European Financial Stabilisation Mechanism (EFSM).
The fund, which provides temporary financial assistance, is supported by the 17 Euro members to the tune of €500b, with the remainder provided by the IMF. Germany is the single biggest guarantor, followed by France and Italy. Together, Germany and France provide 50% of the total guarantees.
Any lending is likely to come with considerable strings attached, as in the case of Greece and Ireland. In November 2010 Ireland agreed austerity measures to unlock the €85b injection agreed by the EFSF and the IMF. The Irish government agreed to cut public spending and pensions, and raise VAT (in 2013) to help reduce its massive public sector debt, which had reached 32% of GDP - some ten times greater than it was committed to when it signed-up to Euro membership under the terms of the Stablity Pact. Ireland also agreed to restructure its ailing banking sector.
The facility was boosted to €1 trillion to in October 2011 as part of the financial package agreed by Euro states in response to the sovereign debt crisis. The other two elements of the deal included the write-off of 50% of Greek debts, and the €106 billion recapitalisation of banks.