The IMF’s Lagarde today criticized the plan to bail out Spanish banks because it places the liability at the foot of the government.

The euro zone needs to quickly set up a mechanism that allows it to directly recapitalize weak banks, “in order to break the negative feedback loop that we have between banks and sovereigns,” IMF Managing Director Christine Lagarde said after a meeting with the bloc’s finance ministers in Luxembourg.

From the G20 statement:

Euro Area members of the G20 will take all necessary policy measures to safeguard the integrity and stability of the area, improve the functioning of financial markets and break the feedback loop between sovereigns and banks.

The near-identical phrase and the upbeat tone at the G20 leads me to believe that plans are moving behind the scenes. I don’t sense the same type of fear from European leaders we saw in Oct 2011.

The thing is, Europe is completely incapable of keeping a secret so something should be leaking out soon. The bar is very low. If the EU summit can put together the framework of a plan, the upside in the euro and commodity currencies is enticing, especially after today’s (overdone) selloff.