Under the scheme set to be discussed, the euro area’s European Financial Stability Facility (EFSF), would have to “insure” bonds of troubled countries by covering the first 30 per cent of any unpaid debts.
To offer this guarantee, the European bail-out fund would have to be able to raise €1.4 trillion – a threefold increase compared to the current size of the scheme.
Last night, it was not clear if or how this money could be raised, although the EFSF may itself sell bonds to international investors.
At the weekend, European finance ministers from Germany and the Netherlands met and disclosed that IMF involvement was under discussion. Wolfgang Schauble, the German finance minister, said yesterday he was confident that the euro would be saved – and go on to become the most stable currency in the world.
/...
http://www.telegraph.co.uk/finance/financialcrisis/8919470/IMF-drawing-up-500bn-package-to-save-Italy-Spain-and-the-euro.htmlAlso:
... "The goal is for the member states of the common currency to create their own Stability Union and to concentrate on that," German Finance Minister Wolfgang Schaeuble told ARD television on Sunday.
Another option being explored is a separate agreement outside the EU treaty that could involve a core of around 8-10 euro zone countries, officials say.
An even more pressing decision faces euro zone finance ministers when they meet on Tuesday.
Detailed operational rules for the euro zone's bailout fund, the European Financial Stability Facility (EFSF), are ready for approval, documents obtained by Reuters showed.
The approval of the rules will clear the way for the 440 billion euro facility to attract cash from private and public investors to its co-investment funds in coming weeks, which, depending on interest, could multiply the EFSF's resources.
/...
http://uk.reuters.com/article/2011/11/28/uk-eurozone-crisis-idUKTRE7AQ0CJ20111128See also:
... Extinguishing the existing debt and funding ongoing needs by the ECB would certainly be much less inflationary than flooding the market with Euros in order to maintain the status quo. While any imposed solution is going to be an affront to the concept of democracy, the tone of this one would at least probably be grudgingly accepted by most of the parties’ electorates. The fiscally conservative countries could at least hope that the ECB printing presses don’t send inflation running and the aid recipients’ populace would hopefully see that their diminished living standards are preferable to the depression they were staring down.
What becomes of the banks that are forced to eat the losses is another matter. Germany, France and a few other countries are going to have to cope with massive recapitalisation to the detriment of their economies. It remains to be seen if bank creditors will finally pay a price, but at least the plan would provide time for an orderly reorganization as opposed to the hysteria that would most likely result from a collapse of the EU.
I suspect that something along the lines of what Jenkins has outlined will come to pass. In some respects this all seems creepily like the period leading up to the passage of TARP. All sorts of plans floating about, predictions of the end of at least banking as we knew it in the US, hard positions and politicians taking everything up to the brink. And then we muddled through.
/...
http://seekingalpha.com/article/310284-the-endgame-in-europe:shrug: indeed :shrug: .
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