News of Italy being locked out of the EFSF

I still can't find the Reuters story that supposedly sent the market tumbling today, however I did find something very similar, the problem is this is from November 9th.

2011

Euro zone has no plans to rescue Italy: officials

BRUSSELS (Reuters) – The euro zone has no plans for a financial rescue of Italy, even though borrowing costs of the euro zone’s third biggest economy have risen sharply to levels that economists see as unsustainable, euro zone officials said on Wednesday.

“Financial assistance is not in the cards,” one euro zone official said, adding the euro zone was not even considering extending a precautionary credit line to Rome.

The euro zone bailout fund, the European Financial Stability Facility (EFSF) will be able to extend such a precautionary credit line to countries which may be cut off from markets, once euro zone finance ministers agree on technical and legal details of the operation by the end of November.

The EFSF will also then be able to buy bonds on the primary and secondary markets, using various insurance schemes that would boost four to five-fold its currently free funds of around 250 billion euros.

Yields of 10-year Italian bonds surged well above seven percent on Wednesday — a level that many economists see as unsustainable.

Ireland and Portugal in the past were forced to seek euro zone and IMF emergency loans once their borrowing costs rose to such levels.

But the size of the potential bailout for Italy, which needs to repay 326 billion euros in maturing debt only in the next 12 months, is too big to handle for the EFSF.

And in this story is nothing new as it was understood when leveraging the EFSF first came out as a 7 page plan hastily thrown together as the G20 pressured the EU to find a resolution before the next (already passed) G20 summit. It has been clear since day 1 that Italy was never considered in the size of the EFSF and this is exactly why forward thinking people have said that the EFSF realistically needs to be closer to $4 trillion dollars to contain the crisis. However, to date, the EFSF has been unable to raise even $3 bb dollars in a credible manner (originally supposed to be a $10 bb euro auction).

How they expect the EFSF to be leveraged (which they still do) when such uncertainties as Italy and Spain have become EU threatening problems in the short time since the leveraged EFSF was devised, is beyond me. It's like throwing away money to rescue Greece and Ireland while Italy, Spain and potentially France put the final nail in the coffin of the monetary union.