Quote: Italian bond yields have now surely passed the point of no return. With 10-year bonds yielding more than 7.2% and rising, it is hard to see how Rome can stop this dangerous spiral. Anyone who bought into Italy's last bond auction two weeks ago is now sitting on a 10% loss. Clearinghouse LCH Clearnet raised margin requirements on Italian bonds Monday, making them more expensive to trade. With the risk of ratings downgrades increasing, international investors are likely to stay away. The mother and father of all bailouts may become necessary if Italy is to avoid a catastrophic default: It has EUR30 billion ($41.5 billion) of debt to refinance this year and more than EUR300 billion in 2012. But who is going to provide the money to keep Rome afloat? Europe's bailout facilities are clearly inadequate--and are anyway not even in a state where they can help. There is still no detail on how the insurance plan or the co-investment funds will work and no evidence that foreign governments want to provide the money to leverage the European Financial Stability Facility. Besides, the EFSF bailout vehicles are designed to help countries maintain market access. It is hard to see how they might help when investors are desperate to dump exposure to the Italian government. Banks got badly burned when they listened to the assurances of euro-zone politicians over Greece. And those that cut their exposure to Italy in the third quarter have been cheered by stock markets. Under the circumstances, it is hard to see how any amount of loss insurance will tempt banks back into the market. The same problem applies to bond purchases by the European Central Bank, widely touted as the solution to the problem. The ECB can buy bonds only in the secondary market. There is no guarantee that any amount of bond buying in the secondary market will ensure Italy has access to the primary market. In fact, banks and other investors may see increased ECB bond buying as a further reason to exit, as the ECB insists on being treated as a preferred creditor: The message from Greece was that the bigger the ECB's exposure, the bigger the private-sector haircut if the debt proves unsustainable. That suggests the only really viable source of liquidity, at least in the short-term, is the International Monetary Fund. A huge expansion of the IMF's resources was discussed at the G-20 summit in Cannes, but no agreement was reached. International lenders might understandably balk at putting their own taxpayer money at risk, given the wealth of the countries in the euro zone and the scale of Italy's problems. It has barely grown for a decade. It is trapped in an uncompetitive exchange rate and suffers from uncompetitive interest rates relative to its major trading partner. It is dogged by dysfunctional politics, while being forced to embark on an austerity drive with no corresponding euro-zone growth strategy to compensate. And it remains at the mercy of a euro-zone governance framework that at every turn has proved inadequate to the magnitude of the crisis it faces. The only good reason for the IMF to intervene is fear of the alternative. But that may not be good enough.