I sense there is a theme developing as the finance ministers gather for one of their gab-fests in Brussels. The IMF is gonna be called into to stop the rot and save the euro zone.
- We will discuss with the IMF the possibility of lending to the IMF, but it is up to the ECB to decide.
Keep in mind, IMF involvement is far from a panacea. All the bailed out countries to date have higher bond yields today than they did when they were bailed out, implying they are not ready to return to the markets for funding anytime soon.
If the IMF comes in to preemptively backstop Spain and Italy, we may get a bounce for a time but I think it will be difficult to sustain. Remember, tough austerity is always part of the prescription, so the recovery tends to be slow in coming and not without considerable pain.
