The eurozone's permanent bailout fund, the European Stability Mechanism (ESM), is filling an institutional gap in the initial design of the monetary union, the head of the ESM said Thursday.

"When the currency union was set up, nobody thought about how to preserve financial stability in the euro area when a member state loses access to market financing," said Jeroen Dijsselbloem, chairman of the board of governors of the ESM.

"As the ESM provides assistance against strong conditionality, it helps beneficiary countries to return to sustainable development," Dijsselbloem, also the chief of the Eurogroup, said at the first annual meeting of the ESM.

At the same meeting, ESM managing director Klaus Regling said both the eurozone's temporary bailout fund, the European Financial Stability Facility (EFSF) and ESM had proven to be effective institutions.

"Both are fully accepted by the markets as our successful bill and bond transactions show. We stand ready to continue to play our role," Regling added.

Regling also urged eurozone countries to implement "the ongoing national reform measures and the improved economic policy coordination rules among euro area member states."

The board of governors, which comprises the 17 euro area finance ministers, approved the ESM Annual Report for 2012, covering the time from the ESM's inauguration on Oct. 8 to Dec. 31 2012.

During this period, the ESM raised and disbursed 39.5 billion euros (52.2 billion U.S. dollars), while receiving total paid-in capital from its 17 member states of 32 billion euros, said the report.

Currently it has paid-in capital amounting to 48 billion euros, and has disbursed 41.3 billion euros to Spain and committed 9 billion euros to Cyprus, according to the report. Endi

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