The next few weeks are crucial for the state of the European Union economy.  A lot needs to happen, and just about all of it requires an influx of euros, says University of Chicago Booth Business School professor of finance Raghuram Rajan.  But where will the money come from?  It is hard to see Germany or other solid economies putting up enough euros given the current political climate.  So Rajan urges us to look toward his former employer, the IMF.  From Ragan's commentary at Project Syndicate:

Indeed, the eurozone’s problems might soon become too big for its members to address. The world has a stake in their resolution. And it has an institution that can channel help: the International Monetary Fund. The IMF could set up a special vehicle along the lines of its New Arrangements to Borrow (NAB), which would be capitalized by a first-loss layer from the EFSF with the IMF’s own capital comprising a second layer.

This NAB-like vehicle could borrow as needed from countries, including the United States and China, as well as tap financial markets. It would offer large lines of credit to illiquid countries like Italy, with conditionality intended to help such countries resume borrowing from markets at reasonable cost.

A special vehicle is required because the amounts that must be made available far exceed what IMF members can usually access, and it is only right that if the eurozone seeks such amounts for its members, it should bear a significant portion of any potential losses. At the same time, the Fund’s capital resources would back the vehicle if the first-loss buffer provided by the eurozone were eroded; that way, the market would understand that strength from outside the eurozone can be brought to bear.

Read A Standby Program for the Eurozone here.