Quick Edit | Europe in rescue mode

Quick Edit | Europe in rescue mode

Finally, Europe is taking the steps needed to calm financial markets and prevent its economy, and that of the world, from tipping over.

It’s a mixed bag of initiatives. The European Financial Stability Facility (EFSF) is being expanded massively from the current €440 billion.

Greece may also be allowed not to fully repay its debt. In other words, debtors may be asked to take a “haircut". This could be as high as 50% of the debt. Many feel Greece simply is not in a position to repay its debt.

The decision to expand EFSF could not have come sooner. Every passing day has the International Monetary Fund or some other institution issuing dire warnings of imminent doom. There are doubts on how EFSF’s expansion will take place, but once a political consensus is at hand, this is just a matter of detail. A bigger blow will be if Greece is allowed to take it easy. If that happens, it can unleash moral hazard on a scale never seen before.