Presenting Today's Deux Ex Rumor

Update: And it gets better. Now Dow Jones:

  • Euro-Area Countries Ready To Provide IMF With Bilateral Loans, According To Draft Seen By Dow Jones

Yet earlier today, none other than Mario Draghi said that loans to the IMF to purchase European bonds would be legally unworkable. Brilliant

With just 30 minutes until the close we were cutting it close to a rumorless, headlineless session. So here is Reuters to the rescue:

  • ESM BAIL-OUT FUND TO BE GIVEN BANKING LICENCE - DRAFT
  • EU DETERMINED TO STRENGTHEN BAILOUT MECHANICS - REUTERS

That the ECB will throw up all over this is one thing. That the ESM will not be able to fund itself is another. That this is not really news, and had been pushed for for days, is a third. That "determinations" in Europe mean nothing, is probably the fourth and final. None of that however matters.

Yet, what might matter is that this is a flat out lie. Again, from Reuters:

ESM BECOMING A BANK "OFF THE TABLE"

Euro zone leaders were also likely to announce they would move forward the launch date of the euro zone's permanent bailout fund, the European Stability Mechanism (ESM), to 2012 from the initially planned mid-2013, the official said.

"There seems to be consensus that it will enter into force earlier. Following the process of ratification, in the summer of 2012," the official said.

The ESM is to have total lending capacity of 500 billion euros, thanks to 80 billion euros of paid-in capital from euro zone countries and 620 billion euros of callable capital.

Euro zone officials said discussions were still going on whether to remove the combined lending limit of 500 billion euros, which had been set on the ESM and the European Financial Stability Facility (EFSF), the temporary fund now in operation.

The official said leaders could agree to a review clause in the ESM treaty, saying they would decide on the final capacity when the ESM becomes operational.

Another issue to be sorted out is the fact that the 80 billion euros of ESM capital had been agreed to be paid in over 5 years -- which could leave the ESM with lower lending capacity to start with. That in turn could mean the whole euro zone bailout capacity would be lower than now.

Euro zone officials said a proposal to give the ESM a banking license -- which could allow it to access European Central Bank funds, boosting its firepower -- had been rejected.

"The idea of giving the ESM a banking license is off the table," the first official said of an idea floated by EU Council President Herman Van Rompuy, backed by France but opposed by Germany.

The official said the treaty on the ESM, which has been agreed but not yet been ratified, would be changed to stress that private sector involvement (PSI) in any restructuring of euro zone sovereign debt would follow IMF procedures.

"We are not giving up the PSI, but saying it could happen in exceptional cases, strictly along IMF rules," the official said.

The source was confident an agreement would be found on how the bloc's Lisbon treaty could be adapted to better tackle the debt crisis, but said the exact text of those changes would be agreed later and finalized by a March summit.