Europe’s turmoil will switch to the political side from the economic side, as nations act to curb their spendthrift ways, says private equity icon Wilbur Ross.
"I think the political troubles in Europe are just about to start because the governments have all pledged to cut their budget deficits," the WL Ross & Co. CEO told CNBC.
"But now comes the hard part of actually implementing it. Will there be more strikes? Will there be more violence? Will the opposition parties take pot shots?”
Concern grew about Spain’s financial position this week after an auction of 12-month government bills produced a yield of 2.3 percent, more than three times the 0.7 percent rate of last month.
Ross doesn’t expect that Europe’s debt crisis will have much impact on the U.S. economy. That’s because we export only 1 percent of our GDP from the European Union and import only 1.9 percent from it.
“Where there could be a spillover is if it gets serious enough that banks fail, particularly the German and French banks. Then you get big exposure to the U.S.,” he said.
Many experts say Europe’s response to the crisis has been inadequate.
“The euro zone leaders have not done a very good job of getting ahead of the crisis, and the problem has spread to the banking system and core euro zone countries,” Pimco portfolio manager Andrew Balls says on the firm’s website.
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