Investors fretting over Europe’s debts

Stephen Beard Feb 8, 2010
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Investors fretting over Europe’s debts

Stephen Beard Feb 8, 2010
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TEXT OF INTERVIEW

Bob Moon: Markets around the world continue to be captivated by the possibility of a European debt crisis. Some comfort was taken from a weekend meeting of the G7 finance ministers. Investors want reassurance that the fiscal problems in Greece and southern Europe can be contained. For more, let’s bring in Marketplace’s Stephen Beard, who is live from London. Good morning, Stephen.

Stephen Beard: Good morning, Bob.

Moon: So what did those finance ministers say to help calm the markets?

Beard: Well, they were generally upbeat about this debt crisis in Europe. The French finance minister said, “We will make sure we manage it,” and the head of the European Central Bank, who was also at the meeting, said he was confident that Greece would cut its deficit as planned. And as a result, the markets here seem reassured.

Moon: Well OK, but surely the concerns about government debt haven’t been erased by all these soothing words.

Beard: No, certainly not. I mean, there are some economists who say that last week’s big sell-off exposed a deeper worry about the amounts of money that governments generally have borrowed to bail out their banks and to stave off recession. Andrew Hilton of the CSFI think tank says the big financial crisis of 18 months ago could now be popping up in another form:

Andrew Hilton: We took on the banks’ problems and made them the government’s problems. We financed the debts that had been run up by the banks with public money, so we took a problem that was in the private sector and placed it fair and square in the public sector.

And the big worry now is that investors may start shunning the bonds of other heavily-indebted countries other than Greece and Portgual. Now, there was an ominous comment from the head of PIMCO, the world’s biggest fund, bond fund today. He said that given U.S. debt levels, he preferred to invest in German government bonds than Treasuries.

Moon: Doesn’t sound too optimistic. Thanks, Stephen Beard.

Beard: OK, Bob.

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