IMF Considers Buying Distressed Bonds Of Italy, Spain
New threat from Europe using U.S. taxpayer cash.
Pause to remember that U.S. taxpayers fund almost 20% of the IMF war chest, which could now be used to buy up the debt of weak Euozone members, a move that would end in massive losses as we enter 2012 and bond yields soar in Italy and Spain as it becomes clear that neither country will meet deficit targets, just like Greece. Since when does the IMF's charter allow for government bond purchases?
LONDON -- Antonio Borges, Europe director at the International Monetary Fund, said Wednesday that the IMF could cooperate with the euro zone by buying up distressed government bonds, according to media reports. The fund could use its own resources to help restore confidence in the debt markets of Italy and Spain, but there are no immediate proposals on the table, Borges said, according to a Bloomberg report. The Financial Times reported that Borges also called for swift action on recapitalizing European banks, warning that a failure to restore confidence in the sector could lead to another credit crunch at a time when the economy is already slowing.
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European Union officials are working on plans to boost bank capital to contain the euro-region’s debt crisis, the International Monetary Fund said, as Moody’s Investors Service warned of deteriorating public finances.
“There is no secret at all that European authorities and the European Commission are all working together on a plan to bring more official capital, more public-sector capital, into the banking sector,” Antonio Borges, the IMF’s European department head, said today in Brussels. “We would recommend that it move to a European approach,” he said. “More should be done on a cross-border basis.”
Signals that European politicians may step up efforts to aid banks and push investors to take deeper losses as part of a Greek bailout reflect international pressure to end the debt crisis and domestic opposition to expanding rescues.
Moody’s Investors Service late yesterday followed its three-level downgrade of Italy by warning that euro-area nations rated below the top Aaa level may see their rankings cut.
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Dexia May Be Left as ‘Bad Bank’ - Bloomberg
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Oct 5, 2011 at 9:57 AM
Reader Comments (2)
http://www.marketwatch.com/story/european-central-bank-to-hold-fire-for-now-2011-10-05
http://www.reuters.com/video/2012/01/24/reuters-tv-why-george-soros-bought-italian-bonds-fr?videoId=229085600&videoChannel=117853
excerpt:
George Soros explains why his fund bought 2 billion dollars of MF Global Italian bonds - and why he would buy even more. The secret sauce: Deflation. That, Soros tells Chrystia Freeland, will give Italian bonds a fantastic yield, even though it...