Now that the problem of a Greek bailout it temporarily over, the region has turned its attention to the size of bailout funds available for a future crisis. The IMF says the value of all bailout facilities must be close to $2 trillion, if the capital markets are to be assured that no other nation in the eurozone will default. The deepest concerns about about Portugal and Spain.
If a funding instrument is to reach nearly $2 trillion, the size of the European Stability Mechanism (ESM) would need to be well in excess of $1 trillion, contributed mostly by nations within the region. The IMF capacity of rescue would have to be nearly as large. G 20 nations have said they will not put money into the IMF unless Europe builds its own fund first. The process has cause a sort of Mexican stand-off
One prime minister of a eurozone nation is optimistic that funds will be raised
Italian Prime Minister Mario Monti expects a “firewall” to be in place as early as next month.
“Size matters,” said Monti in an interview yesterday at the prime minister’s 16th-century residence in central Rome. “If the approach to firewalls is constructive enough in Europe, I believe we will all be in a better position to face any further contagion effect or any resurgence of the crisis.”
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