IMF readies 600-billion-euro rescue plan for Italy: report
The IMF has prepared a rescue plan worth up to 600 billion euros (USD 794 billion) if the debt crisis in Italy deteriorates, Italian newspaper La Stampa reported today, citing IMF officials.
The loan of between 400 billion and 600 billion euros would give Italy a window of 12 to 18 months to implement budget cuts and growth-boosting reforms "by removing the necessity of having to refinance the debt," La Stampa said.
The IMF would guarantee rates of 4.0 per cent or 5.0 percent on the loan -- far better than the borrowing costs on commercial debt markets, where the rate on two-year and five-year bonds has risen above 7.0 per cent.
The size of the loan would make it difficult for the IMF to use its current resources so different possibilities are being explored including possible action with European Central Bank in which the IMF would be the guarantor.
"This scenario is because resistance from Berlin to a greater role for the ECB in helping states in difficulty -- starting with Italy -- could be overcome if the funds are given out under strict IMF surveillance," the report said.
The European Union and the ECB have sent auditors to check Italy's public accounts this month and the IMF is set to send experts soon under a special surveillance mechanism agreed at the G20 summit by Italy's previous government.
Italy's 1.9-trillion euro (USD 2.5-trillion) public debt and low growth rate have spooked the markets in recent weeks, prompting concern that it could have to seek a bailout like fellow eurozone members Greece, Ireland and Portugal.
Italian Prime Minister Mario Monti, a former top EU commissioner who was installed on November 16 to replace Silvio Berlusconi, is under intense pressure to move quickly to implement long-delayed reforms.
