The European Commission authorised, on 3 September, the recapitalisation of banks in Greece in the amount of €10 billion by the Financial Stability Fund. This instrument is part of the emergency assistance provided to Greece in May based on three-year loans by the eurozone and the International Monetary Fund (IMF) to stop the Greek debt crisis spreading to other countries. The Commission found that the Greek scheme is compatible with Article 107.3b of the Treaty on the Functioning of the EU, which authorises state aid to remedy a serious disturbance in the economy. It is also in line with the Commission’s recapitalisation communication. The conditions for recapitalisations under the fund are aligned with the current Greek recapitalisation scheme and consistent with recapitalisation schemes in other member states.

The creation of the Financial Stability Fund (see Europolitics4019) is provided for in the memorandum of understanding on specific economic policy conditions signed on 3 May by the Greek authorities, the EU, the European Central Bank and the IMF. On 21 July, Greece notified to the Commission a request for approval of the recapitalisation scheme under the FSF until 31 December 2010, although the fund is established until 2017.

The fund will provide equity capital to banks by buying shares in the institutions concerned. For these preferential shares, the scheme requires a remuneration of 10% and prohibits the payment of a dividend and coupons. All beneficiary banks will have to present a restructuring plan to the Commission.