Stock markets momentarily surged on Monday after a report surfaced in Italian newspaper La Stampa suggesting that the IMF was preparing to bail out the debt stricken Italian economy. The IMF, headed by Christine Lagarde, soon made a statement claiming: "There are no discussions with the Italian authorities on a programme for IMF financing."
The hopes for a deal come amidst concern among European Union members after credit rating agency Moody suggested the crisis in the eurozone may influence the credit rating of all EU states. It said: "The continued rapid escalation of the euro area sovereign and banking credit crisis is threatening the credit standing of all European sovereigns."
La Stampa claimed the IMF was poised to provide up to €600bn (£515bn) at a rate of 4 -5 per cent, giving Italy 18 months to get a grip on its ailing economy. In recent weeks the cost of Italian 10-year bonds have surpassed the game-changing figrue of 7 per cent, the level at which other eurozone countries were left with no other choice but to seek bail-outs from international monetary organisations.
Despite the IMF rebuttal of La Stampa's claims there are reports that contact between the IMF and the Italian government, headed by Mario Monti, have greatly increased in recent days. An IMF inspection team is shortly due to arrive in Rome.
Michael Hewson, an analyst at CMC markets, said:"Given that IMF chief Christine Lagarde recently said that the fund only had €285bn in emergency funds, this story seems rather implausible, however there does appear to be talk of some form of plan in the works, however it is not immediately clear how the IMF would be able to raise the money needed."