The eurozone leaders finally understood the dangerous potential of the sovereign debt crisis.  They must have received advice from the Fed’s Chairman Ben Bernanke who lived another dangerous crisis in 2008. The eurozone officials have come up with a stabilization plan that covers the whole eurozone and expanded a non-eurozone balance of payments facility to the eurozone during the weekend. This plan deals with a sovereign solvency (or lack of) problem. But this is different from the liquidity problem which begs the ECB to act.

The ECB is behind the curve in employing quantitative easing (QE) as a complementary stabilization plan that provides liquidity on fears of losing independence and igniting inflation in the future, and consequently hurting the euro. ECB President Trichet has gotten his priorities backward. He should worry about the very existence of the eurozone now and independence and future value of the euro next. By avoiding runs on banks, QE is a priority now for the eurozone to continue having the euro existing in the future. QE should maintain liquidty in the banking sector which has faced more risks recently. Third party, liquidity and solvency risks have increased which prompted European banks to become reluctant to lend to each other. They have also moved to over night interbank lending. QE is a non conventional expansionary policy that is needed to promote economic growth when the conventional policy does not work

.Sweden used QE in early 1990s and this policy worked well. Japan used QE during the 1990s but this policy was not aggressive enough and it did not work very well.[1] The United States has an ongoing QE since 2008 and this policy has helped the American economy recover from the 2007-2009 Great Recession.

The eurozone financial ministers and leader met during the weekend to come up with a stabilization plan. The Greece Contagion is the motive behind coming up of a large stabilization plan in a hurry. The plan includes the following:

1. €440 billion stabilization plan for the whole eurozone in the form of government-backed loan guarantees.

2. Expansion of the existing  €50 billion balance-of- payments facility initially assigned to the three noneurozone countries Latvia, Hungary and Romania to a  €110 billion facility to cover the whole eurozone.

3. The eurozone plan and facility come on top of the EU/IMF  €110 billion rescue plan for Greece.

The stabilization plan is a very important protection instrument for the existence and cohesion of the eurozone. But it is very likely that this plan may not help rescue Greece from its woes because the southern European country will not be able to meet its obligations in servicing its mounting and unsustainable foreign debt. Greece needs: debt default and debt forgiveness. If this option is not possible, then the second option is default and exiting the EU.

But for now Mr. Trichet should make up his mind and support the stabilization plan with QE. There will be no value for the euro if the eurozone ceases to exist.[2]

This crisis should spill over from economics to politics. It should change the European political landscape soon. Mr. Gordon Brown will find himself standing in the unemployment line holding hands with Angela Merkel. It will not be long before Sarkosy will shout; asking them to wait so he can hold hands with them. Greece will also see dramatic political changes. They all vaguely see from a distance George Bush standing in the front of the line. They are all too occupied with Iran's nuclear program like George Bush was obsessed with Iraq. They have their priorities backward like Mr. Trichet. They should have education in eurozonism as Bush should have in Iraqism.  All these leaders should receive their political rewards.