The IMF could bail out Italy with up to 600 billion euros ($794 billion), an Italian newspaper reported on Sunday, as Prime Minister Mario Monti came under pressure to speed up anti-crisis measures.
The money would give Monti a window of 12 to 18 months to implement urgent budget cuts and growth-boosting reforms "by removing the necessity of having to refinance the debt," La Stampa reported, citing IMF officials in Washington.
The IMF would guarantee rates of 4.0 percent or 5.0 percent on the loan -- far better than the borrowing costs on commercial debt markets, where the rate on two-year and five-year Italian government bonds has risen above 7.0 percent.
The size of the loan would make it difficult for the IMF to use its current resources so different options are being explored, including possible joint action with the European Central Bank in which the IMF would be guarantor.
"This scenario is because resistance from Berlin to a greater role for the ECB in helping states in difficulty -- starting with Italy -- could be overcome if the funds are given out under strict IMF surveillance," the report said.
That joint action gimmick is the giveaway, and that means that the world's players are now invested in saving the Euro by saving Italy's bond market. The problem is a whole host of other European countries are having bond auctions in the next week or so, and if they fail as badly as this week's auctions did, it's going to be a bloodbath.
We'll see how the markets respond.
Posts
No comments:
Post a Comment