August 4, 2011
Will Germany Save the Euro From Collapse?
The euro will collapse as a currency unless lawmakers, and especially Germany, can agree a common European tax regime and restructure some sovereign debt, a leading market analyst reported after the European Central Bank intervened in the markets.
Justin Urquhart Stewart, director and co-founder of Severn Investment Management, said European leaders urgently needed to address the sovereign debt crisis and take decisive action in order to prevent further contagion.
“It’s not good enough, they [the ECB] will have to do better, they are still in a state of denial. They are going to have to move to full announcements,” he said.
“They need to stop buying dodgy old debt because it is just a charade. They need to replace bad debt with good debt, the same as they did in South America with the Brady bonds.”
“So they need to replace they current system with, let’s call them, 'Trichet bonds,' which are backed by the Germans, who don’t want to do it, but will who will have to do it if they want the euro to survive,” he added. “Otherwise we are looking at the death of the euro, at least in its current form.”
The ECB bought Irish and Portuguese sovereign bonds in the markets and announced a new, six-month liquidity operation on Thursday, but the move did little to calm jittery markets as investors continue to fret about the size of the debt problem.
Traders said the central bank was buying the bonds in the secondary market just after the central banks' president Jean-Claude Trichet told the monthly ECB press conference: "I would not be surprised if by the end of this teleconference you will see something on the market."
ECB in Crisis Mode?
Some analysts said that the return to non-orthodox measures showed the central bank was in crisis mode.
"The re-opening of the six-month facility was a surprise," Gudrun Egger, euro zone analyst at Erste Bank said.
The central bank had phased out 12 and six-month liquidity facilities, keeping only the three-month ones, and coming back on this decision shows that "there is some kind of tension or concern," Egger added.
read more @ http://www.cnbc.com/id/44016285
