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Glossary

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F

Financial Assistance Facility Agreement (FFA)

An agreement between the ESM and a beneficiary country, specifying the financial terms and conditions of the stability support instrument provided to the beneficiary country. 

Fiscal Compact (Treaty on Stability, Coordination and Governance in the Economic and Monetary Union)

The Fiscal Compact is an intergovernmental treaty signed by 25 EU Member States on 2 March 2012. It entered into force on 1 January 2013. 
The Compact requires national budgets to be in balance or in surplus.  This means the annual structural government deficit must not exceed 0.5% of GDP. This balanced budget rule must be incorporated into the Member States' national legal systems, through permanent, binding provisions (preferably of a constitutional character) within one year following the entry into force of the Treaty.

For more information please refer to the website of the Council of the European Union and the European Council

Fiscal consolidation

A policy pursued by a country intended to reduce the government budget deficit and the accumulation of public debt by taking measures aimed at lowering its expenditures or increasing its revenue. An example of a measure aimed at increasing revenues can relate to measures limiting tax evasion in a country.  

Floating rate note (FRN)

A debt instrument with a variable interest rate, mainly issued by financial institutions and governments. The interest rate is tied to a benchmark such as LIBOR or the US Treasury Bill rate. 
The ESM has issued FRNs to finance loans provided to Spain, Cyprus and Greece for bank recapitalisation.

 

Forward Commitment Capacity

An amount that represents the ESM’s remaining lending capacity. It is equivalent to the amount the ESM can commit over the next 12 months for financial assistance, other than direct bank recapitalisation. The Forward Commitment Capacity is updated monthly on the ESM website.

Funding

Raising the necessary funds in order to finance loans and other forms of financial assistance to ESM Members.

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