The Banking and Strategy Initiative

Chillin' out till it needs to be funded

IMF support for Euro: IMF steps in after ECB is stretched for Liquidity

One week after it was mooted that IMF might play a bigger role in the now daily bailout for European banks and sovereigns, European Banks used ECB lines for overnight liquidity to EUR 247 bln (@zerohedge much more than the EUR220 bln envisaged) and in a few hours IMF has published a reworked credit line for ‘stronger’ European sovereigns (anyone can apply, is there any difference any longer?)

The quotas for each nation are based on 5X the nation’s IMF contribution for 6 months and upto  10X the contribution as PLL line funding for 24 months The obviously stop gap measure goes a long way to create a chance for stability according to the IMF Managing Director Christine Lagarde

European policy makers have yet to implement a package agreed to last month that includes a scale up of their rescue funds, proposed guarantees of sovereign debt and a bid to attract more international loans. Germany today rejected calls from allies and investors to do more to counter the turmoil as Spain’s financing costs surged and pressure mounted on Greek political leaders to submit written commitments to austerity measures.

The revamping of lending instruments is the second in 15 months as the IMF tries to get countries to request funding before crises develop.(Bloomberg)

The earlier version of this IMF credit, the Precautionary Credit Line has thus been withdrawn. Hungary stepped in for a mini bailout from the IMF earlier in the afternoon reportedly for Euro 5 billion,  as it alongwith Croatia and Bulgaria get ready for raising 12-15% of their current debt in 2012 Lending to Eastern Europe is already at a virtual standstill

Earlier in an interview to CNBC , George Soros came out to bat for the “lender of last resort” option. ECB seems already to be mor e leveraged than the worst Investment banks of 2007 and till now it has been just liquidity, according ot @zerohedge, enough to bring down the Fed and thus USA too

And here is the math: Italy’s quota is 7,882.3SDR; Spain is 4,023.4 SDR. Multiply by 5 and you get 40 Billion and 20 billion SDRs respectively, which  translates to $61 billion and $31 billion. A total of $91 billion in additional capacity? And that’s it: enough to fund Italy and Spain for… two months. This is the best the regime can come up with?(Zero)

IMF’s doubled quotas for lending have yet been accepted by 17 of its members, Christine going the extra mile for her home team ( but using the US bat and team funds)  Another  Flexible Credit Line for stronger nations was created in Aug 2010 to keep liquidity up


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