The IMF says it has created a new facility for “responsible” countries to use for short-term capital needs. That probably means Greece will not qualify, but maybe Italy will. Or, maybe not.

The IMF will enhance its emergency lending and liquidity windows. The pool will be similar to the Federal Reserve window that lent American banks $9 trillion over the course of the 2008 credit crisis. The Fed window may have saved the nation’s financial system, and the IMF system may do the same for the eurozone. That means the International Monetary fund will do what eurozone nations and the ECB have not been able to do. It will be long remembered that the eurozone could not fix its own problems. That bodes poorly for its future.

The IMF said the following as it made its announcement about the available money:

The reform replaces the Precautionary Credit Line (PCL) with the more flexible Precautionary and Liquidity Line (PLL), which can be used under broader circumstances, including as insurance against future shocks and as a short-term liquidity window to address the needs of crisis bystanders during times of heightened regional or global stress and break the chains of contagion.

The funds will be available at extraordinary levels, and for remarkable periods of time. It:

Can also be used under a 12 to 24-month arrangement with maximum access upon approval equal to 500 percent of a member’s quota for the first year and up to 1000 percent of quota for the second year (the latter of which could also be brought forward to the first year where needed, following a Board review). As under the PCL, arrangements of these durations include Executive Board reviews every six months.

IMF Managing Director Christine Lagarde realizes something that eurozone officials, particularly those in Germany, and the board of the ECB do not, or are not willing to acknowledge. The trouble in Europe is happening now, not later this year or early next. The European Stability Mechanism (ESM) is not supposed to be completely in place until 2013. The European Financial Stability Facility (EFSF) is in place now, but the decisions to deploy its capital have been slow and politically charged.

The Federal Reserve rescued America banks. The IMF is about to do the same of eurozone nations. Each acted without the weight of politics. That is the reason each move makes sense.

Douglas A. McIntyre

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