Most international investors predict at least one nation will eventually dump the euro and they say greater fiscal ties or a smaller currency area are the best fixes for the region’s debt crisis, according to the quarterly Bloomberg Global Poll.
As Europe’s leaders craft their fifth “comprehensive” solution in 19 months, almost half the respondents in the poll conducted Dec. 5-6 say one or more countries will leave the 17- nation bloc within a year and almost a third more predict an exit by the end of 2016. Thirty-seven percent say fiscal union is the most effective remedy for the current turmoil, with 24 percent endorsing a shrinking of the euro’s membership.
The poll of 1,097 investors, traders and analysts who are Bloomberg subscribers highlights the pressure on European policy makers as they meet in Brussels this week to consider tougher budget rules under a Dec. 5 threat by Standard & Poor’s to downgrade 15 euro nations. The survey also validates European Central Bank President Mario Draghi’s push for a “fiscal compact,” with just 15 percent of respondents saying so-called quantitative easing is the top measure for ending the turmoil.
“We’re by no means any closer to the semblance of a solution to this crisis,” says poll respondent Jeremy Cook, chief economist at the London-based currency exchange firm World First U.K. Ltd. “I see a closer move to fiscal union in 2012 and in the longer term we need a United States of Europe.”
New Rules
German Chancellor Angela Merkel and French President Nicolas Sarkozy, the single currency’s guardians, this week strengthened their push for new rules to tighten euro-area economic cooperation, stopping short of a system in which the region’s rich will channel cash to poorer states or issue joint bonds. Instead, they backed automatic sanctions for countries breaking budget rules and fast-tracking a permanent rescue fund to next year.
Draghi, who will lead his second meeting of the ECB’s policy-setting Governing Council tomorrow, said last week that if fiscal links are strengthened then “other elements might follow.” The comment was interpreted by investors as a signal the ECB may buy more bonds. Investor approval for Draghi has almost doubled since he took over the ECB on Nov. 1, rising to 63 percent, from 36 percent in September.
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