Uncle Sam To The Rescue After All: Latest Rumor Sees €600 Billion Bailout Of Italy From US, Pardon IMF

Tyler Durden's picture

The European desperation is palpable ahead of the EURUSD open in a few hours, which has to deal with the aftermath of the Friday afternoon downgrade of Belgium, the junking of Portugal and Hungary, and the prospect of an imminent downgrade of AAA-stalwarts Austria and France. So what does Europe do instead of actually proposing the inevitable debt repudiation that is the only and final outcome? Why more rumors of course. To wit: last night saw the preannouncement of Welt am Sonntag indicating that in order to bypass the lengthy process of treaty changes, Europe would instead proceed with bilateral agreements that would somehow enforce fiscal stability and convince the market that European states would follow the German leader. Well since that is sure to have absolutely no impact, overnight Italian La Stampa is out with a fresh new rumor which cites "IMF sources" according to which the US-headquartered and funded organization would provide a €600 billion loan to Italy at 4-5%. In other words, Uncle Sam, in his role as primary funding agent of the IMF would lose massive amount of money on the "market to fair value" arbitrage, only to bail out the latest European domino. As a reminder, the whole "under market rates" loan from the IMF was implemented in Greece and worked out just swell: at last check the 1 Year Greek bond was trading with a yield of over 300%. Oh, and La Stampa forgot to mention one thing: any changes to the IMF, which currently is massively underfunded and is why the organization was forced to create two new liquidity facilities: a Precautionary and Liquidity Credit line, since it is unable to fund its New Arrangements to Borrow, have to go through US Congress when it comes to expanding funding capacity. Yup, the most dysfunctional, corrupt and criminal thing in the world - the US House of Representatives, where unless everyone is short Italian CDS, this will never pass. In other words: this rumor is dead in the water.

More from Dow Jones:

The International Monetary Fund could offer Italy between EUR400 billion and EUR600 billion in financial support to give Italian Prime Minister Mario Monti a window of 12 to 18 months to enact reforms sufficient to restore waning market confidence in Italy's ability to repay its debt, Turin daily La Stampa reported Sunday, citing IMF sources.


he IMF "Italy package" would consist of loans at an interest rate of between 4% and 5%, compared with the 7% to 8% the country paid at its most recent bond auctions, the report says.


La Stampa reports that the worsening European debt crisis, which has increased pressure on French and Belgian bonds, and seen a German bund auction undersubcribed, is strengthening the conviction at the IMF that Italy is the nation that urgently needs support to avoid a breakup of the euro.


The IMF wants to give Monti another card to play if his reforms are insufficient to dispel financial speculation, the paper said.

The size of any IMF bailout for Italy would be so large that it must be done in coordination with other insitutions, La Stampa said.


Germany has been against any broadening of the European Central Bank's purchases of Spanish and Italian bonds on the open market to support prices. But German resistance to ECB bond-buying could fade if such funds were extended with oversight from the IMF, La Stampa reported.

As for the facts...

The IMF board of governors agreed December [2010] to roughly double quotas from around $375 billion to around $750 billion. But out of the 187 member countries, only 17 have legally accepted the increase, including Japan, the U.K. and Korea. Most of the countries with the biggest quotas, such as the U.S., China and Germany, haven't yet gone through the legal process, such as parliamentary or congressional approval, need to hand over their promised dues.

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apberusdisvet's picture

Who couldn't see this coming?

WonderDawg's picture

If this was a solution, why did it take them until now to figure it out? It's yet another attempt to soothe the market with rumors. What will the half-life be on this one?

Roger O. Thornhill's picture

I've used the rumors as a trading tool. Figuring to get a few days in one direction from them.

And it is true, the half life of this kind of "news" gets shorter and shorter. Most of my hedges are in place for the next part of the game, so it doesn't matter now. In this environment even being partially prepared is better than not at all. Very important to be personally hedged - need I even say it?

WonderDawg's picture

Agreed. Gotta stay nimble. Tricky, though, trying to time the moves. Gotta learn to think like a criminal.

Roger O. Thornhill's picture

Exactly. It is so strange to trade on the lies of the criminals running this mess. My trading used to be based on the quality of the company and their sales, and it would take a month or so for a trade to play out.

Now it is just trying to weed through the astonishing lies. And that is the significant change we have in markets. It's why I came to believe this is going to blow up. I've been alive long enough to see that the markets in general are now totally run on stunningly epic lies & nonsense.

Manthong's picture

"Who couldn't see this coming?"

LOL -- Very first thought after seeing headline.

But if the Fed is a private bank with substantial European ownership (that just happens to print our currency) what is to stop them from loading up their balance sheet with reserves from the whole EU?

In that sense, isn't the US goverment just a customer?


rufusbird's picture

"In that sense, isn't the US goverment just a customer?"

So, if the Fed like MF Global, looses their ass on European Bonds who pays?, their Customers? as in MF Global's customers? So, is their customer the Primary Dealers and banks? No they are the Fed's Directors, that leaves who? Only one customer? No you got to be shitting me! It's me? No no! it is you and you and You!

Manthong's picture

That's what I mean..

The US government is the proxy for us, and as such, IS RETAIL.

Unfortunately, the politicians are the proxy for the banks.

IBelieveInMagic's picture

It is so outrageous that it is surely to happen!

Stack Trace's picture


Been trading this way as well. Only to pull out more Fiat and buy more Physical gold. Thanks to these asswipes I have picked up another 20oz of bullion since September and 100oz silver. I hope prices drop more.

Been reading books on post collapse societies and survival skills, upped my physical training, buying emergency supplies, and trying to get friends and family ready. Been tough waking people up but I see it happening.

My wife has started a food garden, we are shopping for additional home defense, planning ways to get family centrally located, etc.

My wife was originally stationed in Egypt while in the military. She knows what a dysfunctional society looks like. She thinks we are collapsing now.

RockyRacoon's picture

Wonder could I get your wife to talk to mine?

Nobody special's picture

They don't. USA is paying a greater bill, but dear Benny only has to hit the magic button to generate that money.  China has to earn what they contribute.  In essence, China is the one paying more.

MolotovCockhead's picture

And it's the US corporations that are ripping in the profits when IMF proceed to their next stage NWO agenda.

Zero Debt's picture

Multiple bounces will not resurrect the cat.

bigdumbnugly's picture

it will until cat has bounced for the ninth time.  are we there yet?

Manthong's picture

Algos know how to dribble cats.

knukles's picture

If ya can't soothe 'em with rumors, just fuckin' Print More.
Like to solution to all golf problems: Swing Harder
(right Dawg...  And hoping you had a good holiday)

What amazes and I sincerely mean amazes, in awe, numbed by the audacity and ignorance, is that the charade yet continues.
Why even the Economist, official high brow publication du jour of the NWO is suggeating (finally) the demise of this oddity.  And when the Economist throws in the towel to at least retain an appearnace of intelligence and adult demeanor, it's the veritable swan song.

Print More

Getcher yellow metal, step right up, hurrahy hurrahy hurrahy... 

macholatte's picture

Why even the Economist, official high brow publication du jour of the NWO is suggeating (finally) the demise of this oddity. 


My guess is that we will see more such disclosures/leaks/opinions on MSM, which might have the effect of dampening a panic when TSHTF, as well as indignation and arrogant denials from bureaucrats on high (Merkell, Sarkozy, etc) and then the blame game in full bloom. But with GS in firm control of the EU and USA you can bet the can kicking will continue until GS decides to miss a kick or, more likely, change cans.

Going to get more popcorn from my garden, milk the cow and make some butter and ferment some potatoes to make some vodka. 

ArkansasAngie's picture

Just whom in the open market thinks that this will sail through CONgress.  This has no half life. 

Because ... if it were to be true ... what? 

I'll be writting my representatives.  There are negative consequences to them continuing to act in their best interest not ours.

jcaz's picture

...Because it really takes them THIS long to make a move....

My biggest problem trading this noise is trying to remember that these are slow, stupid ships trying to turn in these waters, and something like Zero Hedge is so far ahead of the game that it's easy to second-guess some pretty inevitable information.....

The idiots in Congress will be trying to "sooth" the markets when they've already melted down.....

CPL's picture

Food, gold, silver and lead are the hedges now.  Or if you have the storage capacity...Oil.

tumblemore's picture

"If this was a solution, why did it take them until now to figure it out?"

They wanted to bounce Germany into doing it through crisis-maximizing.

DormRoom's picture

The ogligarchs will monetize on the back of the 99% to ensure the continuity of their power.  It will only lead to high-hyper inflation, and greater income disparity between the 99% & 1%, and further agitation between the BRICs & the West.


But it will give them time to convert nations into police states.


It'll be interesting to see how China & Russia vote on this IMF plan.  And will the IMF (taxpayers) bail out Spain too?

Tijuana Donkey Show's picture

Time to convert? We're 10 years in! This will attach to something involving Syria/Iran/War thingie, and pass with a flag on it's ass. US corporations cannot have the failure of their off-shore, bottom line pumping, tax dodging network, so the US Chamber of Commerce will get this through Con-gress, leaving the rest of us feeling like a 10 year old in a Penn State shower room. 

sabra1's picture

i call dibs on the cheerleaders shower room!

GeneMarchbanks's picture

'It'll be interesting to see how China & Russia vote on this IMF plan.  And will the IMF (taxpayers) bail out Spain too?'

That whole IMF being an international organization facade has been uncovered as bullshit for some time now. I suggest the work of Ha-Joon Chang. Be real, this ain't Yahoo, the IMF is and has been a tentacle of the banking cartel so Russia and China can't really co-opt that organization. You can say with certainty that they aren't influential enough ... yet.

DormRoom's picture

true.. but my thesis is how Western laissez faire monetization will upset the BRICs, and lead to future hostilities (currency wars).  So if China & Russia vote no on the IMF plan it will support this thesis.  If they vote yes, then it would falsify it.  Which is why I'm interested to see how they vote.

macholatte's picture

... in order to bypass the lengthy process of treaty changes, Europe would instead proceed with bilateral agreements...


Votes? We don't need no stinking votes!

Everybodys All American's picture

The dead mobster floating in the St. Lawrence.

Teamtc321's picture

"n other words: this rumor is dead in the water."


Good. Enough is enough already. 

bigun's picture

bernake, "well, since the europeans wont use their bazooka, i guess we'll have to use ours!"

Rakshas's picture

...didn't see that coming...

Mae Kadoodie's picture

No jokes about Monti and cards.

Hedge Fund of One's picture

"No jokes about Monti and cards."


Ah Nuts! :-)

holdbuysell's picture

It's actually IN the Dow Jones article:

"The IMF wants to give Monti another card to play."

GeneMarchbanks's picture

It may or may not be dead in the water but it certainly reeks of desperation. These rumors are brilliant, they're like a windsock telling in which direction the wind is blowing. So what can we deduce from all this? Germans remain stubborn, the cartel continues to come up with extortion schemes. On it goes...

Hedge Fund of One's picture

If they would have applied to the crisis itself half the creativity that they have had to use to come up with these rumors, we might have actually had a viable solution ... 

well, one can wish ...


GeneMarchbanks's picture

By 'viable solution' I can only assume that you mean the only one when you have a solvency problem: Default.

rufusbird's picture

Sounds more and more like evermore desperate attempts to avoid triggering a Credit Default event!

Swaps anyone? What happens when a small one is triggered and everyone else tries to cover? Better stand close to the doors...

Hansel's picture

Maybe it already started.  That $88 billion the Fed just doled out to an "other" could include the IMF.

unununium's picture

+6 trillion.

According to the ZH article, Other indeed includes the IMF.

LookingWithAmazement's picture

Italy saved, euro saved, bye bye "crisis". Told you soooooo for many months. Merry Christmas and a happy euro-2012.

bigun's picture

us 30yr will never be toast as long as bernake owns the printing press

Rakshas's picture

So then, Sante Clause isn't coming this year?



Instant Wealth's picture

If you're a Euro-Bitch shorting the market, Santa might be coming twice this year.