IMF amassing huge €600bn package in case Italy requests help
Published 28/11/2011 | 05:00
The IMF is amassing a €600bn bailout package for Italy in the event that the beleaguered nation finally capitulates and calls for assistance -- further damaging the chances of survival for the euro.
Italian newspaper 'La Stampa' reported that the IMF has prepared the fund in the event that the country's new rulers -- including Prime Minister Mario Monti -- fail to accelerate and implement austerity measures designed to tackle its massive €1.9trillion debt mountain and placate markets.
Italy's long-term borrowing costs soared last week to what are deemed to be unsustainable levels as markets reckoned the country will be next to join a league of bailed-out euro nations, that so far includes Ireland, Portugal and Greece.
Italy would pay the IMF an interest rate of between 4pc and 5pc on the cash injection, while the money would give Mr Monti an up to 18-month window to enact his austerity plans without having to refinance existing debt at punitive rates.
It also emerged yesterday that the European Financial Stability Facility -- the EU's bailout agency -- is seeking to diversify its funding base and might consider selling as much as €20bn of debt a month.
Meanwhile, so-called vulture funds are continuing to target stricken nations' debt in the hope of picking at what could be lucrative carcasses. New York-based distressed debt fund Fir Tree Partners is among those reportedly acquiring or seeking to acquire Greek government bonds at a deep discount in the hope of making big profits when the debt is restructured.
It is speculated the funds are trying to buy 25pc or more of specific Greek government bond issues -- probably foreign-denominated ones -- so that they might be able to block any effort to restructure them and hold out for better terms.