The Fed to Bailout Europe?

With the deepening of the EU’s debt crisis, which has affected the strength of even the so-called “core” euro-zone countries, and the European Central Bank ‘s [ECB] shaky role as a lender of last resort to gaurantee European sovereign debt, the U.S. Federal Reserve may sidestep the Frankfurt-based ECB and take matters into its own hands.

According to Reuters, which cites German newspaper Die Welt, the Fed, along with the 17 euro-zone national central banks, may help provide the IMF with funds that could enhance its capacity to provide liquidity-support to Europe’s debt-ridden states.

[via Reuters] The [German] paper, citing sources close to the negotiations, said the central banks could pay at least 100 billion euros ($134.2 billion) into a special fund that could be used for programs for nations struggling to control their debts.

“Also other central banks, for example the U.S. Federal Reserve, are apparently prepared to finance a part of the costs,” the paper said in an advance copy of an article to appear on Monday.

U.S. Treasury Secretary Tim Geithner may discuss the idea in the coming weeks when he visits Europe, the German paper said.

Reuters points out that a Treasury official had said on Friday that the U.S. “was not planning to make bilateral loans to the IMF and the lender’s resources were adequate.”

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About Ron Haruni 1067 Articles
Ron Haruni is the Co-Founder & Editor in Chief of Wall Street Pit.

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