New Euro Bailout Fund Could Fall Short

“The new fund set up to bail out struggling euro zone economies may face a 150 billion euro ($189 billion) shortfall if Spain and Italy need a full bailout program before the end of 2014, according to analysts at Credit Suisse.

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However, its firepower could be significantly improved if the European Central Bank (ECB) intervenes in secondary bond markets – an outcome which has been rumored in recent weeks. (CNBC Explains: How Does the European Central Bank Work?)

The European Stability Mechanism (ESM) is one of the key pillars of euro zone leaders’ attempts to deal with the debt crisis which threatens to spread its tentacles ever further. It’s expected to come into force later this year, as a replacement for the European Financial Stability Facility (EFSF), if the German Constitutional Court rules positively on it on September 12th.”

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