Fourth, the financial system despite the policy backstop is severely damaged.

To state the problem more generally, the eurozone requires a liquidity backstop for its fiscal authority.

By being perceived as too big to fail, their banks benefit from a government backstop or downside guarantee.

This has revived concerns that governments may be unable to backstop a too big to save financial system.

With OMTs, the ECB has converged toward the Fed in its ability to backstop each of its individual parts.

Simplifying financial institutions, especially those with an implicit government backstop, must also play a role in rebuilding a dynamic economy.

Although investors believe that the backstop is unlikely to be used, its mere presence dissuades them from betting against Italy.

But the 2008 financial crisis showed that, when push comes to shove, the government will backstop money market funds nonetheless.

That scare was contained when the G 7 committed to increase guarantees of bank deposits and to backstop the financial system.

China s government has clearly indicated that it will use any means necessary to backstop growth in the face of a free fall in exports.

As a result, important projects like establishing a European banking union, which would require a fiscal backstop, are likely to be delayed or even endangered.

Above all, regulators would force financiers to hold more cash on hand to cover their own bets, and not rely so much on taxpayers as a backstop.

With roughly 2 trillion in foreign exchange reserves, the Chinese do have deep pockets to fund massive increases in government spending, and to help backstop bank loans.

The survey also clearly indicated why the interest rate spread for Italian government bonds is not much wider the perceived backstop provided by the European Central Bank.

In the absence of a backstop for emerging country finances, the doomsday scenario of a protectionist vicious cycle reminiscent of the 1930 s could no longer be ruled out.

Public debt is already high, and many sovereigns are near distress, so governments ability to backstop their banks via more bailouts, guarantees, and ring fencing of questionable assets is severely constrained.

Meanwhile, the ability to backstop, ring fence, and bail out banks and other financial institutions is constrained by politics and near insolvent sovereigns inability to absorb additional losses from their banking systems.

After all, if markets truly believed that the ECB would refuse to backstop errant governments, investors would run away from participating countries at the first sign that conditionality was not being met.

Indeed, simply by providing a credible backstop against the risk of a eurozone collapse, the scheme has become one of the most successful measures introduced by any central bank in recent history.

This implies using official resources like the EFSF not to backstop an insolvent Greece, but to recapitalize the country s banks and those in Ireland, Spain, Portugal, Italy, and even Germany and Belgium that need more capital.

It is (now) no secret that they have operated so far as large sophisticated compensation schemes, masking probabilities of low risk, high impact Black Swan events and benefiting from the free backstop of implicit public guarantees.

Unlike the Great Recession of 2008 2009, today there is widespread hope that America has the capacity to stay the course and provide a backstop for the rest of the world in the midst of the euro crisis.

Finally, sovereign risk is rising consider the troubles faced by investors in Dubai, Greece, and other emerging markets and advanced economies. This has revived concerns that governments may be unable to backstop a too big to save financial system.

In that case, Greece s geopolitical position would be weakened, its economy would sink further into recession, and social tensions would rise. Moreover, instability would become chronic, because the eurozone would no longer offer a backstop for fiscal and financial laxity.

PARIS Financial markets have rallied since July on the hope that the global economic and geopolitical outlook will not worsen, or, if it does, that central banks stand ready to backstop economies and markets with additional rounds of liquidity provision and quantitative easing.

As a result, when a crisis like the war in East Timor in 1999 or last year s political stalemate in Côte d Ivoire arises, NATO can backstop whichever country or group of countries chooses to take the lead in carrying out a UN mandate.

A well capitalized IMF, much better capitalized than pre crisis, should be able to fill this backstop similar to what central banks do (and did in the crisis) to prevent a credit freeze and the inevitable and excessive economic damage that would result.

Within days of the crisis, her government was in talks with the International Monetary Fund to secure a loan to backstop Ukraine s economy against the worst, and reached agreement with near record speed, despite domestic political objections to the rigor of its terms.

He proposed to establish fully integrated, cohesive teams at Headquarters, comprising military, police and civilian personnel, to direct and support field operations such teams would provide a single responsive backstop for a mission and expand and contract according to the mission's needs.

The Government, with the support of the Team, has continued a contingency programme aimed at increasing the capacity of the armed forces to deal effectively with threats to external security and to backstop the Sierra Leone police in maintaining law and order.

The good news is that a solution is now slowly taking shape that promises to create a mechanism by which the ECB could backstop the EFSF. This could be achieved simply by registering the EFSF as a bank, which would give it access to normal ECB refinancing on the same terms as other normal banks.