European Rescue Fund Insufficient To Rescue Italy, May Be Doubled To Over $2 Trillion

Tyler Durden's picture

The latest italy contingency stunner comes from Die Welt which has just reported that the European rescue fund will be insufficient to bail out the latest biggest loser in the game of musical ponzi chairs, Italy. As Reuters translates: "The existing rescue fund in Europe is not sufficient to provide a credible defensive wall for Italy," the central bank source was quoted telling the newspaper in an advance text of an article to appear on Monday. "It was never designed for that," the source added." The newspaper said that the rescue fund might have to be doubled to up to 1.5 trillion euros. But it was not clear if it was the central bank source calling for the increase." Doubling the bailout fund is not a new idea and was previously proposed by Nout Wellink of the Dutch Central Bank, although as Die Welt explains, the decision will ultimately be not that of the ECB but of the separate governments. Germany, as a reminder, is already the biggest backstopper of Europe, and is on the hook for €211 billion euros as the primary funder of the EFSF: which just happens to be the CDO at the heart of the eurozone. Should Germany have to add another 200 billion euros to its rescue commitment, Merkel can forget any and all reelection chances, which is funny since just today it was announced that "Chancellor Angela Merkel has stated publicly that she wishes to run again in 2013. This comes as polls show she would face strong challengers from the opposition Social Democrats." Her chances would be roughly zero if German taxpayers learn that the fate of a failed monetary experiment is increasingly more reliant on their direct labor even as the populations of "austere" countries refuse to work and merely subsist on existing entitlements.

More from Die Welt on what tomorrow will be an unpleasant day for UniCredit longs, and why the Eurozone is imploding: even central bankers now admit the bureaucrats in charge are full of (sh)it:

It is the money politicians not only to increase, but also to a more flexible design of the rescue. "The European central banks are no longer willing to buy bonds of other states," it said in central bank circles. "This should enable the Treasury rescue package." Moreover, one must be able to intervene quickly, without waiting for long program negotiations. In addition, be a better crisis communications required: Euro Group President Jean-Claude Juncker "While talking constantly, but nobody listens to him more," said a central banker.

Especially important was immediately take to the participation of private sector involvement in crisis plans on the table: The damage is already enormous, without giving it a benefit. Above all, the German Federal Government is therefore strongly criticized in ECB circles.

But fear not: the Dow Transportations index is at an all time high.