Tags: Goldman | O’Neill | Portugal | Spain | Lurking | Background

Goldman's O’Neill: Portugal, Spain ‘Lurking in Background’

Tuesday, 23 Nov 2010 02:46 PM

Portugal and Spain are “lurking in the background” of the Irish debt crisis as the proposed rescue plan doesn’t address the euro region’s “fundamental problems,” said Jim O’Neill, chairman of Goldman Sachs Asset Management.

“Unless there’s an underlying solution to not just the debt challenge, but also” to how European monetary union “sits together involving all these domestic political partners, how can we forget about the problems lurking with Portugal and Spain,” O’Neill said in an interview from London with Deirdre Bolton on Bloomberg Television’s “Inside Track” today. “All it’s done, particularly given the domestic Irish squabbling, is raise the risk factors for everybody about those places.”

Ireland’s Nov. 21 decision to request emergency aid from the European Union and the International Monetary Fund has done little to reverse a jump in borrowing costs. Even as EU leaders said Ireland’s bailout will stem contagion in the euro area, investors are turning attention to Portugal, which increased spending in the first 10 months of the year and has barely grown in a decade.

“There was a big policy response to the Greek mess six months ago, and here we find ourselves back in a slightly different version of the same problem,” O’Neill said. “But now, it’s got an additional degree of more complexity because it’s interfering with domestic politics and you’ve got Portugal and Spain lurking in the background.”

O’Neill said the euro was “fundamentally” overvalued and that he recommends being “careful” about buying the currency.

“I can’t see for long-term investors what the great attraction of the euro is,” he said. Fair value for the euro is about $1.20 against the dollar, O’Neill said.

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Portugal and Spain are lurking in the background of the Irish debt crisis as the proposed rescue plan doesn t address the euro region s fundamental problems, said Jim O Neill, chairman of Goldman Sachs Asset Management. Unless there s an underlying solution to not...
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