European Union Enters Year Two Of Debt Battle
Analysts say that Europe Union enters year two of its fight to contain the euro region’s debt crisis still struggling to ease market’s jitters, according to Bloomberg.
Having already committed almost $1 trillion to bail out Greece and Ireland and assert their determination to save the euro, the European leaders are back to the drawing board in order to calm investors.
Their latest plan, elements of which will be debated when finance ministers meet next week, may extend help to Portugal, increase the size of their aid reserves, lower interest rates on bailout loans, and authorize purchases of outstanding bonds.
That still may not be enough, said Barton Biggs, managing partner of Traxis Partners LP, who is “short” European securities, betting on their decline. Officials should issue joint euro-region bonds, a measure opposed by Germany, he added.
“The European Union and the ECB and the governments are being foolish,” Biggs told Bloomberg. “The first rule of central banking and crisis management is do what you’ve got to do and do it big enough. You’ve got to risk overkill rather than not do enough.”
Speculation that European officials are stepping up efforts to end the debt crisis led stocks higher globally on Wednesday with the MSCI World Index rising to its highest level in more than two years.
Underscoring the move toward what EU Economic and Monetary Affairs Commissioner Olli Rehn called a “comprehensive” solution, German Chancellor Angela Merkel indicated on Wednesday a desire to do “whatever is needed to support the euro.”
Efforts last year stumbled on Merkel’s demands for Greek budget cuts in rescue negotiations, says Bloomberg.
Italian Finance Minister Giulio Tremonti said Germany can’t afford to do nothing while its “neighbor’s house” burns.
Policy makers may still not be acting “quickly enough in order to avoid further market disruptions,” Mohamed El-Erian, Pimco’s CEO told Bloomberg.
“Over the long term, Europe is both able and willing” to find a solution, said El-Erian. “The question is do you get the leadership up front for it to happen without collateral damage.”
(capital.gr)
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