Buiter had polar opposite views on the US subprime crisis. I’ll leave it at that. But, we are pretty much simpatico here.
I doubt whether much of the available EFSF resources (whatever they turn out to be) will actually be used to support the sovereigns, directly or indirectly. Rather they will just use enough to allow the ECB to argue that they are acting jointly with the fiscal facility. The EFSF’s resources are more likely going to be used to recapitalise banks and/or to guarantee senior unsecured bank funding (the latter may require some changes in the EFSF framework) in our view. The IMF also will likely come in only with limited resources – just enough to give them a serious say in the design and enforcement of the conditionality. The $400 bn or so currently uncommitted IMF resources plus $100 bn or $200 bn of new money (under the reborn GAB, the NAB, the NNAB or even through increased SDR subscriptions) is more than enough to allow the IMF to be viewed as an entity that has to be taken seriously.
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