Posted on 12/23/2010 2:19:26 AM PST by TigerLikesRooster
Citigroup fears fresh wave of sovereign defaults and bank failures in eurozone
Citigroup has warned of a fresh wave of bank failures and a string of sovereign defaults in Europe unless EU leaders come up with a credible response to the crisis.
By Ambrose Evans-Pritchard, International Business Editor 6:18AM GMT 22 Dec 2010
Professor Willem Buiter, the bank’s chief economist and a former UK rate-setter, said the eurozone is paralysed by a "game of chicken" between the European Central Bank and EMU governments in charge of fiscal policy.
Both sides are trying to shift responsibility onto the other for shoring up Southern Europe and Ireland, raising the risk of widening contagion. "The market is not going to wait until March for the EU authorities to get their act together. We could have several sovereign states and banks going under. They are being far too casual." he said.
"This is a combined sovereign and banking crisis and that is a poisonous cocktail. The policy response has been woefully inadequate. There is a very small pot of money for a very big crisis," said Dr Buiter.
Dr Buiter described the EU’s rescue fund as an "insolvency machine" because it charges punitive rates of 6pc, preventing high-debt countries from clawing their way out of their trap. "I don’t know why they bothered to create it," he said.
(Excerpt) Read more at telegraph.co.uk ...
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