Tags: HSBC | Politicians | Economy | Hostage

HSBC’s Gary Evans: Politicians Holding Economy Hostage

Monday, 19 Dec 2011 12:32 PM

Politicians will put off taking tough decisions when making economic reforms in Europe and the United States like they always do, thus prolonging economic malaise in 2012, says Gary Evans, HSBC’s global head of equity strategy.

In Europe especially, uncertainty will abate only when Germany eases up in its opposition to allowing for the sale of eurobonds or European Central Bank purchase of assets to ease the crisis.

"One possible scenario for the next few months, then, is that a complete collapse of confidence in the eurozone finally forces the German government to save the euro by dropping its opposition to fiscal transfers and debt monetization," Evans writes in a note, according to CNBC.

"An alternative scenario is that markets rally each time there is a prospect of a euro-solution (as they did in July and October) but give back their gains when it becomes clear that the proposed measures are feeble. Meanwhile, the global economy will be a hostage to politicians' actions (in the U.S., too, in an election year) – as well as facing its own structural headwinds from deleveraging."

Policymakers continue to disagree over how to navigate Europe out of the crisis, with European Central Bank officials remaining steadfast against using monetary policy to bail out troubled countries on the grounds that doing so would stoke inflationary pressures.

European Central Bank President Mario Draghi has remained firm that the now is the time for politicians to act and make politically unpopular decisions to right their ailing economies as well as rely more on bailout funds they have created.

"The important thing is to restore the trust of the people – citizens as well as investors – in our continent. We won’t achieve that by destroying the credibility of the ECB. This is really, in a sense, the undertone of all our conversation today," Draghi told the Financial Times.

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Politicians will put off taking tough decisions when making economic reforms in Europe and the United States like they always do, thus prolonging economic malaise in 2012, says Gary Evans, HSBC s global head of equity strategy. In Europe especially, uncertainty will abate...
HSBC,Politicians,Economy,Hostage
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2011-32-19
Monday, 19 Dec 2011 12:32 PM
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