Photo: Valerie Everett on Flickr
These days, the news about Europe seems garbled by a lengthy list of acronyms and abbreviations, and it’s hard to keep track of which is which.So let’s set that straight. Here we give you your ultimate guide to the most important European institutions.
Now try and say “EFSF” five times fast.
(If you have no idea what’s going on, be sure to read our latest edition of The Eurozone Crisis For Dummies first.)
EMU refers to the economic and monetary union in which countries that use the euro participate.
According to the European Commission, it the concept of this union constitutes the fifth out of six steps the eurozone is supposed to undertake in order to achieve economic integration, the last of which includes 'harmonised fiscal and other economic policies.'
The distinction between these two final steps forms the source of the rut that caused this mess. It is generally accepted that if the eurozone enjoyed more economic integration, it would never have had all these sovereign debt problems.
The term is often used more generally, however.
The European Central Bank is the independent entity in charge of monetary policy for the euro area. It makes interest rate decisions, manage foreign exchange reserves, and is the exclusive issuer of euro banknotes.
The ECB is far more limited in its powers than, say, the U.S. Treasury, because it cannot monetise sovereign debt or engage in a bank recapitalization scheme like TARP.
It says it has limited its ability to stem the escalation of the sovereign debt and banking crises currently threatening the eurozone because it cannot act as a lender of last resort to sovereigns under the current EU treaty.
As if it weren't already hard enough to say, the EFSF is one of the most highly talked about organisations in the eurozone right now. The Facility amounts to a temporary eurozone rescue fund, created in late 2011 and headed by Klaus Regling.
EU leaders agreed in October to expand the facility's funding past the €440 billion ($612 billion) initially agreed upon through IMF support and insurance on EFSF bonds, but pretty much everyone admits that the fund's firepower still will not be big enough.
The EFSF's credit rating is also on downgrade review by Standard & Poor's. It would be far less effective if it lost its AAA-rating, likely if France loses its triple A.
The European Stability Mechanism is the permanent successor to the EFSF.
EU leaders agreed to push up the date it will be implemented to July 2012.
Whatever its implementation date, however, the ESM in principle contradicts a German Constitutional Court ruling, on the basis that the mechanism threatens German sovereignty. It could also face legal troubles in other European countries.
LTRO stands for long-term refinancing operation, a highly technical operation that allows private banks to borrow money from the ECB for a period of months or years.
The ECB recently extended the maturity of the LTROs it offers, with two three-year offerings. It also lowered the interest rate on these loans and relaxed stipulations about the collateral banks have to put up in exchange for the central bank funding.
Some investors speculated that the move could amount to a roundabout bailout of the eurozone, however most remain sceptical that it accomplishes anything other than the stated goal of loosening the tightening credit conditions of the euro area.
Ecofin is comprised of the finance ministers (and the occasional economic or budgetary minister) of the 27 European Union states.
The council traditionally meets ahead of summits of EU leaders. Finance ministers are often charged with working out the nitty gritty of the more general proposals put forth by EU heads of state.
Not to be confused with Ecofin, Eurogroup is the colloquial term for a meeting of 17 eurozone finance ministers -- not all 27 EU ministers. In reality the group doesn't actually have a name. Eurogroup meets s day ahead of Ecofin meetings.
The differences between the Eurogroup and Ecofin have been exacerbated recently, with non-euro EU states increasingly trying to budge into negotiations on a eurozone fix.
The European Commission is the executive body of the European Union. It is a cabinet government comprised of Commissioners from each of the 27 member states. The EC proposes legislation, implements decisions, and makes sure treaties are being followed.
The inability of the European Commission to properly keep countries in line on their economic policies constitutes one of the biggest causes of the crisis right now. Its ineffectiveness is a major weakness of the eurozone.
The European Council comprises the heads of state of all 27 EU countries, the President of the European Council (currently Herman van Rompuy) and the President of the European Commission (currently Jose Manuel Barroso).
This EC has been the most important decision-making body during the crisis, although mere agreement on plans within the Council on any issues involving sovereign funds must be approved by the national governments themselves.
The EBA is the bank regulator of the EU, based in London. It's a brand new entity which started up early in 2011.
It most often makes headlines when it conducts massive bank stress tests, in which European banks are forced to publish huge amounts of data on their sovereign exposures, equity, and liabilities. It published the results of its latest round of recapitalization tests in December.
The EIB is an international organisation owned by the members of the European Union and established in 1958. The bank's purpose is to support EU policy decisions by making sound investments.
The bank really hasn't played much of a role in the sovereign debt crisis of late, despite talk that it might be able to help fund the EFSF if need be.
A more general financial instrument, a SPIV (or just SPV) is an institution that focuses on financing and acquiring specific assets. Its framework is such that, in the event of a bankruptcy, its obligations will remain secure.
In the context of the eurozone crisis, EU leaders are reportedly considering using an SPIV to fund the EFSF. In this scenario, it would issue debt, which would (hopefully) be bought by the IMF, sovereign wealth funds, and/or private investors.
This constitutes one of the two plans being considered right now in order to leverage -- or increase the firepower of -- the EFSF.