Meet the latest addition to the EU’s alphabet soup, the ESM. The European Stability Mechanism will replace the European Financial Stability Facility when it ceases to exist in 2013.
Germany wanted to avoid a permanent bailout mechanism and have the market bear the risk but once gain, moral hazard wins the day. Private creditors will have much more exposure after mid-2013, it should be noted.
Also buried in the slew of news from the EU today was confirmation that Greece will be given a longer term to payback its loans., which should head off the default that market participants felt was all but inevitable.