15th November 2012
The euro debt crisis is over and the risk of a euro zone breakup has reduced significantly according to fund manager Skandia’s investment expert Rupert Watson.
However Watson is more pessimistic for Europe’s domestic growth and unemployment outlook.
He argues that measures taken by the European Central Bank and a changed political outlook in the most powerful European country Germany means that the crisis no longer poses a risk to the global financial system and for equity investors.
In a note, he says: “If you are Spanish and unemployed, the difference between the two is largely semantic. However, for global equity investors there is a huge difference between the two. A debt crisis has the potential to undermine growth and financial markets around the world, while a governance and unemployment/crisis is more of a local problem with implications only for local economies and markets.”
He says that most importantly the ECB is playing a greater role, offering to buy unlimited quantities of short dated bonds issued by countries requesting support and thus being subject to an agreed reform programme.
“This backstop is a formidable one and should ensure countries have few problems funding themselves,” he says.