The International Monetary Fund (IMF) could be tapped for up to €600bn (US$814bn) to help bail out the crippled Italian economy. The planned deal, which is far from confirmed, would be designed to give new prime minister Mario Monti a 12-to-18 month window to allow him to restructure the country’s economy without having to worry about refinancing its debt.
With the rates of government bonds having risen above 7% recently, the IMF would reportedly guarantee lower rates around the 4% mark. This would certainly help Italy, which has to refinance as much as €400bn within the next year. The IMF is reportedly considering teaming up with the European Central Bank (ECB) to push the loan through.
Many observers see the Italian debt crisis as the most dangerous threat to the eurozone so far. Some believe that if Italy’s economy deteriorates much further, the entire euro system could be doomed. Others, however, argue that the eurozone is likely to contract and drop less stable economies before re-emerging in a streamlined, more cohesive form.