A new permanent bailout fund for the eurozone will come in to force later Monday at a meeting of eurozone finance ministers in Luxembourg.

The European Stability Mechanism (ESM) is designed to support faltering economies and banks in countries that use the euro currency.

It will eventually replace the old system, the European Financial Stability Facility, which has already lent about €200 billion, or more than $250 billion, to Greece, Ireland and Portugal over the past two years.

Eurozone countries will make the first capital payments into the fund this week to ease a deepening debt crisis .

Each eurozone government will contribute start-up money in amounts roughly proportionate to the size of the country’s economy.

Germany, with the largest economy, will contribute about 27 per cent, followed by France and Italy.

The fund should reach its full lending capacity of €500 billion by 2014 by selling ESM bonds in the open market.

The head of the ESM board of governors, Jean-Claude Juncker, has said he hopes at least €200 billion will have been raised by the end of October.

European finance ministers meeting in Luxembourg will also discuss how to recapitalize Spain's banking sector, hit hard by a collapse of the country's real estate market.

Less pessimistic

Olli Rehn, the EU's financial and monetary affairs commissioner, said the organization's ability to react to the financial crisis in the 17 countries that use the euro has much improved compared with two years ago when the crisis began. He also welcomed the launch of the permanent bailout fund.

"We have enough challenges in Europe," Rehn said as he entered a meeting of finance ministers from the eurozone. He added that while nobody was in a " party mood," he was "less pessimistic for the moment of the future prospects of the eurozone than, for instance, in the spring."

On Tuesday, German Chancellor Angela Merkel makes her first visit to Greece since the debt crisis began in 2009 — and on Wednesday, Spanish Prime Minister Mariano Rajoy travels for talks with French President Francois Hollande in Paris.

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  • #10. Ireland (14.4%)

    Shoppers pass by the many discount shops of North Earl Street in Dublin, on Thursday, April 26, 2012. Ireland's economy has suffered four straight years of falling property prices and consumer spending in the face of rising taxes, unemployment and emigration. (AP Photo/Shawn Pogatchnik)

  • #9. Lithuania (15.4%)

    Lithuanians protest during an anti-government rally at the Parliament palace in Vilnius, Lithuania, on Monday, Feb. 7, 2011. Lithuanians are increasingly upset about rising unemployment and unpopular reforms. (AP Photo/Mindaugas Kulbis)

  • #8. Latvia (15.4%)

    With Latvian flags and flowers, people march in a procession to the Freedom Monument to honor soldiers who fought in a Waffen SS unit during World War II, in Riga, Latvia, on Tuesday, March 16, 2012. (AP Photo/Roman Koksarov)

  • #7. Georgia (16.3%)

    Georgian opposition supporters with Georgian and EU flags rally in the main street in Tbilisi, the capital of Georgia, on Sunday, May 27, 2012. (AP Photo/Shakh Aivazov)

  • #6. Greece (17.3%)

    A woman collects goods from a garbage bin outside a supermarket in Thessaloniki, Greece, on Tuesday, July 3, 2012.

  • #5. Croatia (17.7%)

    A protester holds a Croatian flag during an anti-EU rally in Zagreb, Croatia, on Friday, Dec. 9, 2011, after Croatia signed a treaty to join the European Union in 2013. (AP Photo/Darko Bandic)

  • #4. Spain (21.7%)

    A queue of people wait to enter an unemployment office in Madrid, Spain, on Thursday, Aug. 2, 2012. (AP Photo/Andres Kudacki)

  • #3. Serbia (23.4%)

    In this photo taken on Thursday, Oct. 13, 2011, a young child walks in a corridor at an asylum center in Banja Koviljaca, Serbia. Serbia, still scarred from the Balkan wars, is battling with widespread poverty and unemployment. (AP Photo/Darko Vojinovic)

  • #2. Bosnia (45.3%)

    Belma Avdic, 8, leans on the door as her mother Amela Avdic, center, hugs her sister Belma Avdic, 4, inside their old family house near the Bosnian town of Kalesija, on Wednesday, Feb. 1, 2012. Belma Avdic's father and mother are both unemployed and the family lives in poverty in a small house without money to buy wood or coal for heating. (AP Photo/Amel Emric)

  • #1. Kosovo (45.3%)

    This Wednesday, Aug. 22, 2012, photo shows pedestrians walking across the Ottoman era cobble stone bridge over the almost dried out Bistrica river in western Kosovo town of Prizren. (AP Photo/Visar Kryeziu)