Sources: IMF to offer Italy a 600 billion euro bailout via ECB funding

According to Austrian daily Der Standard, Italy is to receive a 600 billion euro bailout courtesy of the IMF. Note: the article has what I assume to be a typo, referring to 600 million euros instead of 600 billion. I have fixed that in the translation below. Also note that the ultimate source of this information is La Stampa, an Italian daily newspaper.

Translation from German:

According to a media report, the International Monetary Fund (IMF) is preparing an assistance program with a capacity of up to 600 billion euros for heavily indebted Italy. Appropriate credit could be awarded for a period of twelve to 18 months in order to stabilize the financial situation of the country, reported the Italian newspaper "La Stampa " on Sunday, citing an IMF official. With interest rates between four and six percent, it would be much cheaper than current two-and five-year bonds with interest rates of more than seven percent.

Funding still uncertain

According to the report, the IMF may not be able to cope with the auxiliary loans from its current funding, and so different options would be considered for funding. Thus, for example, payment by the European Central Bank (ECB) is in conversation, which the IMF could guarantee. With the assumption of ECB aid under IMF control, Germany, which rejects a stronger involvement of the ECB in euro rescues and presses for the greatest possible independence of the central bank, should also be reassured, the newspaper quoted an IMF representative.

The European Union and the ECB had recently sent experts to Rome to examine Italian public finances. The IMF also wants to send their own auditors. In Italy, the debt burden is about 1.9 trillion euros. Additionally, the country is currently suffering from weak economic growth. This has led to worries in financial markets in recent weeks that Italy, like Greece, Ireland and Portugal before it, may need financial assistance. The new Prime Minister Mario Monti is under strong pressure to cut costs to make up for the failings of his retired predecessor Silvio Berlusconi.

Source: IWF bereitet 600-Millionen-Euro-Hilfsplan für Italien vor – Der Standard

Original Source: E l’Fmi prepara una cura da 600 miliardi per l’Italia – La Stampa (hat tip Marco)

Update: Alice Cook at UK Bubble points me to this link in the Telegraph confirming that Spain is in the mix as far as the IMF deal goes: IMF drawing up £517bn package to save Italy, Spain and the euro


Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.