Tags: BlackRock’s Doll Europe is Investors Biggest Risk in 2012

BlackRock’s Doll: Europe is Investors' Biggest Risk in 2012

Monday, 09 January 2012 07:48 AM

Europe will serve as the investment community's biggest risk in 2012, as the continent will not be able to emerge from the debt crisis in a neat and tidy manner, says Bob Doll, BlackRock's Chief Investment Strategist.

Yields on Italian government bonds are spiking above 7 percent, while the euro has dipped to its lowest level against the dollar in 15 months, and the best the world can hope for are somewhat disorderly restructuring or fiscal overhauls.

"Europe is the most important risk in 2012," Doll tells Yahoo Finance's The Daily Ticker.

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While the European Central Bank won't step in directly and buy bonds issued by debt-ridden European nations such as Greece, Italy or Spain, it has made low-cost loans available to banks as a way of easing credit conditions there.

That's good policy but won't steer the continent out of its doldrums, Doll says.

"As long as the euro holds together, the recession in Europe, which has already started, will be a mild one," Doll says.

"If there's financial — not economic — contagion to the U.S., then all bets are off for our economy staying healthy."

All 17 eurozone countries may use one currency that is managed by one central bank, but each one cuts costs and rights its fiscal ship on its own, which will have to change, Doll adds.

"I think that restructuring is absolutely necessary in some way, shape or form," he says.

"Europe is going to be a sloppy mess, but I think we'll get through it."
International Monetary Fund Managing Director Christine Lagarde has said that some European countries have already slid into a recession but stopped short of saying the whole continent had done as such.

"I think some European countries might be technically in a recession. Now whether that means the whole of the eurozone or the whole of Europe is in a recession, I don't think so," Lagarde said recently, according to the Associated Press, without identifying which countries might technically be in recession.

"There is great variety within those two zones to probably justify neither of the eurozone nor the European Union would be in a recession — which does not mean to say that all members inside of those two zones would be immune to recession."

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