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The eurozone's new bailout fund, the European
Stability Mechanism (ESM), should be able to lend directly to
struggling banks, the European Commission said Wednesday, in a
proposal likely to resonate in Spain.
In a 28-page report on the eurozone, the E.U. executive argued that
it was necessary "to sever the link" between struggling private
lenders and cash-strapped national governments.
To that end, "direct recapitalization by the ESM might be
envisaged," the commission said.
Under current rules, euro bailout loans can only be provided to
governments, which can in turn use them to recapitalize banks. The
ESM is not yet operational, as it still needs to be ratified in
several countries, including Germany.
