The market's recent rally hit a roadblock Monday after the EU finance minister's meeting ended with little or no decisive action. On Tuesday, an early rally attempt petered out and then reemerged despite S&P's downgrade of Italy and a warning from the IMF about potential capital shortfalls at European banks.
"Europe is the land of Lilliputians when it comes to effective leadership, says Steve Forbes, chairman of Forbes Inc. "I would have thought with disaster facing them now they would have done something over the weekend. Maybe they'll do it next weekend."
The disaster, Forbes says, is the potential for "default by small country like Greece cascading into something that's going to put the system in jeopardy."
To avoid such an outcome, he recommends the adoption of a TARP-style program to recapitalize European banks and protect the banking system from a Greek default. Once those programs are established, then Greek debt can be restructured, he says, citing the restructuring of Latin American debt in the 1980s as a roadmap to deal with Europe's current woes.
"Before end of year, [Europe's] got to come to something different than simply throwing money at [Greece] and hoping," Forbes says.
"Positive things can be done. The problem is lack of political will."