Eurozone economies 'set for recovery'
Manama, November 20, 2011
The euro zone crisis will be resolved and will not break apart and no countries will leave the zone, according to a top official of Swiss Bank Sarasin Alpen.
'The euro zone economy will stall but stock markets should recover in 2012 as there is a global recovery by the second half of next year,' said Sarasin chief investment officer Burkhard P Varnholt, who was visiting investors in Bahrain last week.
'The message from the financial markets is loud and clear, euro zone states have lived beyond their means for far too long,' he said.
'A sure and lasting foundation for all euro government bonds is urgently needed,' he added.
Varnholt said Sarasin Alpen expected Europe to centralise its fiscal policy in what will be a de facto fiscal union.
'The initially hesitant and then incremental political response to the crisis were counter-productive because they did not build trust, but instead tended to undermine the markets' confidence,' he added.
'Now that Italy has also been hit by the wave of mistrust, it appears inevitable that responsibility for the euro crisis will have to be shouldered collectively.'
He said that Greece would probably be able to get funding in the short term which will postpone its crisis until 2013.
The Europe Central Bank has clearly decided it is better to bail out Greece than bail out the banks but Greece will remain an insolvent country and will need to have its debt restructured.
'An honest distinction has to be drawn between solvent countries and insolvent countries,' he said.
'The sovereign debt of insolvent states could theoretically be restructured but that would require national guarantees for imperilled banks.
'No euro zone country can save itself because it can't be a lender of last resort. That role has to fall to the ECB and to make this effective we need to monitor fiscal policy which will take a re-worked Maastricht Treaty.'
He predicted that the GCC stock markets would recover along with the global markets next year helped by a strong oil price which he saw rising by more than most people expected to between $130 and $150 a barrel.
But he said the regional markets still suffered from a lack of liquidity and to become more attractive they needed more IPOs and needed to attract more private equity capital.-TradeArabia News Service