One intriguing idea floating around Washington: if the ECB can’t bring itself to bail out Italy direct (sovereign credit risk, no expertise in setting lending conditions) it could in theory, according to Article 23 of its protocol, lend vast amounts to the IMF.
The Fund would then lend them on to Italy, taking on the credit risk and enforcing conditions – both of which are what it is there for.
This would require the ECB’s red lines on financing bailouts to crumble, and might cause the odd raised eyebrow, if not explosion of disbelief, among the IMF’s more assertive emerging market shareholders. But what if it is that, or another Great Depression?
For views and opinions on the European Union from Peter Spiegel, Joshua Chaffin, Alex Barker and Stanley Pignal, follow the 