EU Unveils $1 Trillion Currency and Debt Fund

A woman poses with a euro coin in front of the giant symbol of the EU's currency outside the European Central Bank's headquarters in Frankfurt, Germany, on April 29. The euro has slipped in recent weeks against the U.S. dollar due to Europe's sovereign debt woes.(Thomas Lohnes/AFP/Getty Images )

European Union leaders and finance ministers unveiled a groundbreaking emergency loan fund worth almost $1 trillion in an effort to halt a spiraling sovereign debt crisis that threatens to engulf the euro currency.

Policymakers outlined the loan and security purchase program on Monday morning in a show of force to stem the recent slide of the euro currency, which last week fell to a 14-month low against the U.S. dollar.

“In the wake of the crisis in Greece, the situation in financial markets is fragile, and there was a risk of contagion which we needed to address,” read a statement from the EU. “We have therefore taken the final steps of the support package for Greece, the establishment of a European stabilization mechanism, and a strong commitment to accelerated fiscal consolidation, where warranted.”

The three-year program, called theEuropean Financial Stabilization Mechanism, will be funded with 500 billion euros (US$960 billion) from EU member nations, with another $250 billion from the International Monetary Fund. Of the 500 billion, 440 billion euros (US$570 billion) will come from Eurozone governments, while 60 billion (US$75 billion) will come from the EU’s budget, according to a statement from Spanish Economy Minister Elena Salgado.

A meeting was held last weekend after the euro struggled, falling more than 4 percent, as concerns heightened that Greece’s runaway debt problems may spread to other financially weak Eurozone nations, such as Portugal, Spain, and Italy.

The plan was unveiled a few hours after the markets opened Monday in Tokyo.