In September 2011, the IMF estimated that roughly half of the Euro Zone’s $9 trillion in outstanding government debt was now at ‘heightened credit risk‘.
This is a crisis which billionaire investor George Soros has described as, “…a more dangerous situation now than in 2008,” (which is further contextualized when you realize that Bank of England Governor, Mervyn King, described the 2008 crisis [on the record] as being, “…the most serious financial crisis we’ve seen at least since the 1930s, if not ever.”)
From small businesses to global banks and central bankers, there are few participants in the global financial market who are totally shielded from the Euro crisis. Even at ground level you will find 10.4% of the population of the 17 countries that use the single currency were, as at January 2012 out of work (over 16.5 million people).
To learn more about the Euro Zone crisis and what it means for the global economy, we spoke to Larry Hatheway (Chief Economist and Chief Strategist at UBS, a bank with [as at December 2011] over USD 2.2 trillion of invested assets). UBS are headquartered in Switzerland, and with over 65,000 employees globally are ranked as the second largest wealth manager in the world.
Q: Just how serious is the Euro Zone crisis?
[Larry Hatheway] This is a very serious issue that merits the very close attention of everyone involved be that Greece’s creditors, other official institutions, policy-makers throughout Europe and also market participants globally. Why? Failure to find some sort of solution in a co-ordination fashion runs serious risks of leading to a very disruptive set of economic and financial outcomes…. potentially every bit as bad as the financial crisis of 2008.
Q: Do you think a break-up of the Euro is likely?
[Larry Hatheway] I still think it’s unlikely, but I would have to say that while it was a very remote possibility a year or two ago… it’s less remote now. It still seems to be the risk-case rather than the central-case at the moment. A break-up of the monetary union is so potentially fraught with risk that all participants, whether individual countries like Greece, or the remaining Euro Zone members, would do their best to avoid it… Continue Reading.
Originally published in All About Alpha