Another delay in plan to solve European crisis
Jeremy Hobson: European Finance ministers are gathering this morning in Brussels ahead of a key summit that was supposed to end with a grand solution to the European debt crisis. But divisions between the key players — Germany and France — mean that plan won’t come this weekend. It’s now scheduled to be unveiled at another summit next week.
For more on this, let’s bring in Nick Davey, a banking analyst with UBS. He is with us from London. Good morning.
Nick Davey: Good morning.
Hobson: Well, what’s the reaction there in Europe to the fact that these leaders have pushed back the deadline to release this “grand plan” to deal with the debt crisis?
Davey: I would say there’s extreme uncertainty in the marketplace at the moment. Don’t forget that it was only about two weeks ago that we were promised a bazooka solution this weekend that would incorporate all of the things the market is currently uncertain about — namely, the level of contribution from the private sector and the restructing in Greece; secondly, to what extent the European banking universe needed to be recapitalized; and thirdly, to what extent the European bailout fund should or could be increased.
Now, we are — I would say — two days before the supposed revelation of this “grand plan,” and we’re no closer to, really, to understanding the details behind it.
Hobson: And I imagine all this uncertainty is particularly worrying for some of these countries that are sort of on the edge like Italy, Spain, Portugal — places like that.
Davey: You’re right. That being said, I mean there are some glimmers of hope out there. Specifcally here at UBS, we like and put forward the Nordic banks —
Hobson: Nordic — Norway, you’re talking about?
Davey: Exactly. The Norwegian banks, specifically I think, are an exreme safe haven. There are extreme levels of wealth, low soverign debt to GDP — exactly the kind of metrics that the eurozone is lacking.
Hobson: And of course, Norway is not part of the euro.
Davey: Exactly. They’re not part of the euro, crucially. And secondly, it has a backing system which hasn’t bought into the eurozone.
Hobson: I’m curious — are there any places within the euro that people think are safe?
Davey: Very little at the moment. I mean, contagion risk is really seen as a problem. The eurozone interconnectedness, I think, spooks the markets — certainly during a period of political indecision. So at the moment, core eurozone I think remains an extremely difficult place to be. We here at UBS prefer areas outside of the eurozone — the U.K. to an extent, but certainly Norway and Sweden as well.
Hobson: Nick Davey, banking analyst at UBS joining us from London. Thanks, Nick.
Davey: Thank you.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
