The sovereign debt crisis in Europe is not over
CHICAGO, August 17, 2011 — "Market pessimism about the sustainability of Greek and Portuguese government finances (has) morphed into a broader skepticism extending to Italy and Spain, and even France," says Adolfo Laurenti, deputy chief economist at Mesirow Financial, in his August issue of Themes on the Global Markets.
Laurenti notes that "an acceleration in the European crisis took place after the events of July 8-11, when Italy came under attack." He explains why this is a game changer:
- "It showed that the crisis was not limited to the "periphery" and that therefore, the core of the euro area is not immune, as we had been repeatedly reassured by European authorities."
- Ranking fourth in total GDP and in population headcount among EU countries, "Italy is 'too big' to bail out," Laurenti argues.
- Even though Italy has made progress in restoring its public finances, politics appear to have turned the markets against Italy. "Suspecting that the champion of austerity (Finance Minister Giulio Tremonti, blamed by the prime minister for local election losses) might be on the way out, global investors ran for the door."
The only solution, concludes Laurenti, is ” long-term structural change to government spending patterns, coupled with a broad-based, pro-growth plan to jump-start the economy.” In the meantime, “the perception that change is not likely to occur is driving investors away from Italy.”
The August issue of Themes on the Global Markets, as well as archived issues, can be found at mesirowfinancial.com.
Mesirow Financial is a diversified financial services firm headquartered in Chicago. Founded in 1937, it is an independent, employee-owned firm with more than $43 billion in assets under management and 1,200 employees in locations across the country and in London. With expertise in Investment Management, Global Markets, Insurance Services and Consulting, Mesirow Financial strives to meet the financial needs of institutions, public sector entities, corporations and individuals. For more information about Mesirow Financial, visit mesirowfinancial.com.
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