“A bailout of Italy—on the order of that organized for Greece, Ireland, and Portugal—would require a loan of $1.4 trillion. Bailing out Spain would cost an additional $700 billion. Such sums, representing some 16 percent of eurozone GDP, are unlikely from eurozone members alone, even if the IMF provides one-third of these amounts. Such bailouts would not only strain the frail political support for these exercises to the breaking point, they would also call into question the debt-carrying capacity of the core European countries.
At the same time, given the systemic global implications of a financial collapse in Italy, and possibly Spain, the rest of the G20 could hardly stand idly by as another Lehman-class global credit crunch unfolded.
A globally coordinated bailout—led by the IMF and including bilateral assistance from the United States, Japan, China, the UK, and other countries—would amount to 5 percent of the rest of the G20’s GDP. It would inevitably have to carry far-reaching conditions not only on Italy, along the lines set out above, but also on the rest of the eurozone.”