They said it – views from 2010 about 2011 revisited

As the end of 2011 draws near, predictions for 2012 are coming thick and fast. Yet, who can claim to have clairvoyant abilities and who is just hoping last year’s analysis will be buried with their financial losses? InvestmentEurope brings you a series of brief outlooks for 2011 as they were.

John Redwood, Chairman of Evercore Pan-Asset Capital Management:

“There was a flurry of activity in Brussels and Frankfurt as the old year drew to a close. The EU member states have agreed a Treaty amendment to take effect in 2013. This will give clear legal support to a new Euro bail out fund organised by the EU and Euro member states.

(After analysis of the Irish market…) The Euro crisis will get worse if the EU and the ECB between them cannot help Ireland to re-establish strong banks and a growing economy. An IMF programme would include devaluation, to help a country become more competitive.

In 2011 the danger is the Euro system will put too much pressure on too many weaker countries and economies. Greece is not fixed…The Spanish problem also looms for 2011…The European Central Bank is keen to wind down its special measures to support Spanish and other EU area banks. Can they do so in a controlled manner which does not panic the markets?

The truth is the EU has not worked out how to finance countries that have falling output and rising budget deficits. They have not thought through a recovery policy that can generate the growth they need. They have not decided how to make all banks super solvent so there are no more fears about them. Until they do these three things convincingly Euroland will be subject to further market shocks. We advise investors to stay away from the area in the meanwhile.”

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