By: Dr. Mike Campbell

The German parliament is set to vote on whether to endorse a Eurozone proposal to beef-up the European Financial Stability Facility (EFSF), to give it up to €440 billion of funding for bailing out peripheral economies with sovereign debt problems (since Italy is the Eurozone’s third largest economy and may need to tap this facility, the word “peripheral” may need redefining).

The move is likely to get adopted, but German Chancellor Angela Merkel may be bruised by the vote. Germans are none too pleased to bailout wayward economies with profligate spending addictions – although none of the funding would be provided as a gift. Ms Merkel leads a coalition and opinions within it on the best way forward are divided.

Analysts question whether the enlarged EFSF would be up to the task of providing enough funding and confidence to end speculation against the Euro and talk of sovereign default. Politicians around the world seem unable to set aside partisan party political point-scoring and act to defuse a problem which could plunge the financial world into Armageddon. The public debts of Japan and the USA are enough to make the Eurozone crisis seem like little more than a lover’s tiff.

Talk of Greek default is surely premature. The enormous damage that a sovereign default within the Eurozone would cause could produce a global financial tsunami which would change the face of modern capitalism forever. The world is so interconnected that the “cancer of a Greek default” could not be surgically excised. If the Greek economy were a commercial venture, then its perilous position could be saved by a parent company public stating that it would back the subsidiary’s debts, come what may. The magnitude of Greece’s debts, in the larger scheme of things, is not a problem of global proportions. Greece has been “encouraged” to put her house in order and take austerity measures designed to curb the borrowing problem and eventually restore fiscal security. What is needed now is clarity, calm and a return to sanity. It is time for political leaders to lead!