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"This, in turn, has intensified the liquidity problems for a wide range of bank and nonbank financial institutions".
There is an urgent need to distinguish between situations of countries with temporary liquidity problems, for which the IMF should be acting unconditionally as lender of last resort – the reason for which it was set up – and countries with deeper financial problems where such temporary loans result in debt spirals.
"There has been an unusual and substantial withdrawals of funds by depositors from the bank precipitated by recently published statements regarding the chairman of the board of directors of the bank, which has the potential to create severe liquidity problems for the bank," the Central Bank governor Dwight Venner said.
The expiry of the current bailout programme in a month's time could cause liquidity problems for Greek banks, says Raoul Ruparel of the Open Europe think-tank.
Or to put it another way, fears about solvency of sovereigns translates into potential liquidity problems for banks - which can then turn the solvency fears into self-fulfilling prophesies.
The CEO of Tyco International said the firm lined up $6 billion of new financing in January to eliminate potential liquidity problems for 2003 last monthh Tyco sold $4.5 billion of new convertible bonds and said it obtained a new $1.5 billion bank credit facility.
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However, unless the Eurozone acts quickly to stem the uncertainties surrounding the Eurocrisis, what has essentially been a liquidity problem for Italy thus far (having to rollover debt at gradually rising interest rates) may well turn into a self-fulfilling solvency problem leading inevitably to a need to restructure its debt.
Firstly, is there a liquidity problem for the government itself?
UniCredit, with liquidity problems of its own, has turned to Libyan government investors for a cash infusion.
But because of Britain's dominant position in financial services, this aggravates the liquidity problems abroad, for instance in Germany.
The central bank is addressing banks' liquidity problems — their need for cash day to day.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com