Many observers are confused. They cry for the ECB to "man up" and "do what it is supposed to do" and be the lender of last resort. It does have that function for banks, not for sovereigns. The lender of last resort to sovereigns is the IMF.
The IMF has been grasping for new facilities to address the current crisis. Today it announced new precautionary and liquidity facilities, providing funds
for between six and 24 months. The likely candidates in the euro zone are Italy and Spain, while countries in eastern and central Europe would be other potential candidates.
The shorter-term (6-months) could be as much as 5 times the country’s IMF quota, with few conditions. This "Precautionary and Liquidity Line" could also be used for longer periods (12-24 months) and would give a country access to 10 times their IMF quota. This would have more conditions attached and would be subject to IMF reviews.
Recall that in late October, Italy was offered a precautionary line of credit from the IMF. Instead Berlusconi opted to "invite" IMF monitors to supervise the implementation of austerity.
The IMF also created a new "rapid financing instrument" which seems designed more for those suffering from balance of payments and exogenous shocks. Northern African and the Middle East would be potential candidates. Countries can borrow their IMF quota in full.
Some critics may point to this being the second adjustment of the IMF’s lending facilities in the past fifteen months. While there is some merit in the criticism, the ability the the IMF to act quickly stands in contrast to European officials, who seem to move at glacial speeds. Another criticism is that while many reporters called this a new IMF facility, it simply replaces existing ones. The "rapid financing instrument" is also a product of merging existing instruments to emergency assistance in cases of natural disasters and reconstruction (post-war) conditions.
These are still relatively small steps for the IMF and for the scale of the crisis. More will be needed. The IMF does not have the funds if both Italy and Spain wanted to borrow 10x their IMF quotas. This means that the IMF will be going back to the drawing board sooner or later.