Telegraph – Citigroup: Fear Fresh Wave of Eurozone Sovereign Defaults, Bank Failures

From The Telegraph – Citigroup fears fresh wave of sovereign defaults and bank failures in eurozone:

Citigroup has warned of a fresh wave of bank failures and a string of sovereign defaults in Europe unless EU leaders come up with a credible response to the crisis…

Professor Willem Buiter, the bank’s chief economist and a former UK rate-setter, said the eurozone is paralysed by a “game of chicken” between the European Central Bank and EMU governments in charge of fiscal policy.

Both sides are trying to shift responsibility onto the other for shoring up Southern Europe and Ireland, raising the risk of widening contagion…

Dr Buiter described the EU’s rescue fund as an “insolvency machine” because it charges punitive rates of 6pc, preventing high-debt countries from clawing their way out of their trap. “I don’t know why they bothered to create it,” he said…

Mark Schofield, Citigroup’s global head of interest rate strategy, said Portugal will need an EU rescue soon and that it is “highly likely that Spain will go the same way”. This risks over-powering the €440bn bail-out fund.

“Restructuring of some sovereign debt is inevitable. There is a chance that Spain could still make it, but the debt trajectory looks unsustainable if a broader EU-wide solution isn’t found,” he said.

Bob Diamond, the next chief executive of Barclays, echoed fears of further eurozone ructions. He told Jeff Randall at Sky News that there is a “distinct possibility’ that one or more countries will be forced out of the euro, though the rest of EMU will hold together.

Read more.

This entry was posted in Accountability, Bankers' Bailout, Budget, Debt Default/Restructuring, ECB/IMF, Economy, EU, Euro / Sovereign Money, ireland, Solutions and tagged , , , . Bookmark the permalink.

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