So the details boil down to this – the AAA guarantors cap the size of exposure the EFSF can take. So the EFSF can borrow, insure, guarantee, or otherwise take on risk up to about 452 billion. So now we know the size has been constrained by the AAA guarantors. It seems like some of this “money” will be allocated to Greece, Ireland, and Portugal. Some will be allocated to banks for capital. Some will be allocated to a “guarantee” program or something that can be levered up. Talk is that about 250-275 billion Euro will be allocated to that program – which Sarkozy made clear is $1.4 trillion. I’m surprised he didn’t quote the size in yen. It would have sounded a lot bigger.
This is useful information and in line with what we expected. The deal is constrained by the size of the AAA rated guarantors. So far it looks like none of them have been put on watch. I suspect France and Austria are the most at risk over time.
As far as I know, there is still no information on the IIF proposal, but at least all the pieces are starting to come together so more detailed analysis can be done.