There is a flurry of activity going on in Euroland this weekend. I have a number of stories up on different proposals in the offing. Clearly, European policy makers have got religion about saving the euro. Expect some kind of announcement soon.

According to Austrian daily Der Standard, Italy is to receive a 600 billion euro bailout courtesy of the IMF. Note: the article has what I assume to be a typo, referring to 600 million euros instead of 600 billion. I have fixed that in the translation below. Also note that the ultimate source of this information is La Stampa, an Italian daily newspaper.

Translation from German:

According to a media report, the International Monetary Fund (IMF) is preparing an assistance program with a capacity of up to 600 billion euros for heavily indebted Italy. Appropriate credit could be awarded for a period of twelve to 18 months in order to stabilize the financial situation of the country, reported the Italian newspaper “La Stampa ” on Sunday, citing an IMF official. With interest rates between four and six percent, it would be much cheaper than current two-and five-year bonds with interest rates of more than seven percent.

Funding still uncertain

According to the report, the IMF may not be able to cope with the auxiliary loans from its current funding, and so different options would be considered for funding. Thus, for example, payment by the European Central Bank (ECB) is in conversation, which the IMF could guarantee. With the assumption of ECB aid under IMF control, Germany, which rejects a stronger involvement of the ECB in euro rescues and presses for the greatest possible independence of the central bank, should also be reassured, the newspaper quoted an IMF representative.

The European Union and the ECB had recently sent experts to Rome to examine Italian public finances. The IMF also wants to send their own auditors. In Italy, the debt burden is about 1.9 trillion euros. Additionally, the country is currently suffering from weak economic growth. This has led to worries in financial markets in recent weeks that Italy, like Greece, Ireland and Portugal before it, may need financial assistance. The new Prime Minister Mario Monti is under strong pressure to cut costs to make up for the failings of his retired predecessor Silvio Berlusconi.

Source: IWF bereitet 600-Millionen-Euro-Hilfsplan für Italien vor – Der Standard

Also see:

• Franco-German secret negotiations for new euro contract
• Officially Eurobonds are taboo but behind the scenes nothing has been ruled out
• Juergen Stark explains ECB opposition to monetisation is not about inflation
• Foreign news: Belgium gets austerity, EU prepares for Eurobonds, Netherlands says breakup inevitable, Spain to get IMF bailout

All of the articles above are from just this weekend and point to serious damage control now ongoing in Euroland. I doubt whether any of these proposals is an effective long-term solution. But, this is what’s on offer. Boxed in by the ever-worsening sovereign debt crisis, the Franco-German euro zone axis is trying to formulate a policy that both adheres to the German economic orthodoxy without worsening the crisis any further.

But, the damage is done to the real economy. Dithering will lead to recession in the euro zone, Switzerland and the UK at a minimum, according to recent economist projections.

MMT fans: Also note that, while I see an independent central bank as a good thing like Juergen Stark in the article above, top MMT scholars like Mosler and Wray do not. They call for the Fed to be abolished with its role conducted out of the Treasury.

This post originally appeared at naked capitalism and is posted with permission.