The big European news of the day came from IMF headquarters in Washington. The IMF announced it had begun discussions with members about raising an additional $500 billion for the fund. The IMF believes it needs $1 trillion on hand, according to its statement.
"Based on staff's estimate of global potential financing needs of about $1 trillion in the coming years, the Fund would aim to raise up to $500 billion in additional lending resources. This total includes the recent European commitment of about $200 billion in increased Fund resources."
This led to the quote of the day (courtesy Daily Telegraph) from the IMF's Olivier Blanchard:
"Post the 2008-09 crisis, the world economy is pregnant with multiple equilibria—self-fulfilling outcomes of pessimism or optimism, with major macroeconomic implications."
Parse through the big words and Blanchard puts his finger on something I've felt these last six months as I have suddenly become a financial journalist specializing in the euro zone debt crisis (I used to be a war correspondent - a much more straightforward type of journalism).
There are way too many factors shaping this crisis - many of them social and political, not economic. No algorithm can encompass all these permutations. The most important thing I've learned is that much of this crisis has been based in self-fulfilling outcomes - except, of course, the Greek situation where the horrendous debt numbers trump everything.
Anyway, as I noted last week, there is a renewed sense that a corner has been turned with the arrival on the scene of a new Italian Prime Minister, the serious, sober technocrat Mario Monti.
Monti was in London today to meet British prime Minister David Cameron and visit the London Stock Exchange where he raised the intellectual tone above that of his predecessor Silvio Berlusconi when he told traders, "The UK and Italy both believe that adherence to fiscal consolidation is a necessary condition for growth. It is not, however, a sufficient condition."
I've been struggling to understand that concept since taking logic as an undergraduate but in this case Monti was focusing on the new mantra in the euro zone. Austerity is necessary but not sufficient to end the crisis. The sufficient condition is growth. How to get there without increasing debt is the 64 billion euro question.
The IMF news and the continued sense that Italy and Spain will not succumb to the debt contagion that started in Greece kept stock markets in stable mood. The FTSE and DAX posted extremely modest gains and the CAC-40 a marginal loss.