IMF Agrees To Shove Head Deep In Sand, Will Lower Eurobank Capital Needs 

When all else fails, change the rules, and shove your head even deeper in the sand:

IMF has agreed to substantially lower initially estimate for European bank sector capital needs according to Eurozone sources• Private sector expected to meet bank recapitalisation needs, according to Eurozone sources• Eurozone has no plans for public support for banks over and above money in bailouts for Greece, Ireland and Portugal according to Eurozone sources• "We have discussed this with the IMF in detail and the IMF has agreed that this initial figure will be revised downwards and the revision will be quite substantial," a euro zone official participating in the talks said. 

Of course, this won't change anything about the fact that Eurobanks are insolvent, that the ECB is undercapitalized, that the Greek bailout is falling apart. But what matters is that the IMF, or the world's former bailout, and now completely irrelevant, organization courtesy of China, will allow banks to proceed far further undercapitalized than prudent, until it has to bail out not one, but all, and at the same time. As a reminder, the IMF expected a need of $200 billion, which the eurocrats say is goign to be far lower... Even as Goldman's report, first released on Zero Hedge, said that the full amount will be 5 times bigger, or $1 trillion. As much as Goldman is blasted left and right, they at least know how to use that HP12C. Which is far more than we can say about the idiots from Luxembourg.

More from Reuters:

Euro zone governments have no plans to inject any further capital into banks over and above the money earmarked for the financial sector in the emergency loan programmes to Greece, Ireland and Portugal, sources said.

Euro zone officials discussed the issue of banking sector recapitalisation on Monday and Tuesday as part of the preparations for the informal meeting of European Union finance ministers in Poland on Sept. 16.

The issue has returned to the table after the IMF called for additional capital to boost the European banking sector, estimating the extra need at 200 billion euros in a draft version of an unpublished report leaked to the press.

"We have discussed this with the IMF in detail and the IMF has agreed that this initial figure will be revised downwards and the revision will be quite substantial," a euro zone official participating in the talks said."

There is a need for additional capital in the European banking system but the magnitude of the required recapitalisation is nowhere near the initial number of the IMF," the official said.

Euro zone officials estimate banks have in total already raised some 50 billion euros in additional capital in the run up to the European bank stress tests in July and now had between six and nine months to further increase it where necessary."

In all likelihood it will be private capital that will be raised. For public money, we have no plans of a large scale or any banking recapitalisation programme over and above the contingency reserve for the financial sector in the three programmes that we are currently running," the official said.

The capital needs could also be solved through mergers and acquisitions. Only at the end of the six to nine months, if the identified banks will have failed to have sufficient capital, would governments step in with public money, a second euro zone official said.

The euro zone has earmarked 10 billion euros to help banks in Greece, 35 billion for Ireland and 12 billion for Portugal under the euro zone bailout programs