Eurozone problems remain biggest concern for global investors
Investors are worried about the risks still being faced by the eurozone following the financial rescue of Greece, Ireland and Portugal.
The current economic uncertainty in the eurozone is the biggest risk concern for international investors, according to Daniel Wallick, a principal in Vanguard Investment Strategy Group.
“When we think about global risks, the number one global risk we see is in Europe and that’s the sovereign bond issue. An effective resolution [of this issue] is one of the primary economic concerns we have,” Wallick said in an interview on Monday.
While international investors are concerned about risk in the US, over its deficits and its housing market, the European debt crisis is seen as “the number one risk”, he said.
The process of bringing faltering European economies back to health has proved more difficult than thought and there are still doubts as to whether the measures adopted will be sufficient.
The challenge in Europe is that every country is different and it takes time and considerable effort to decide on the right amount of financial support and the right measures to cut budget deficits, he said.
Following the financial rescue for Portugal agreed earlier this month, there have been fears that Spain or another eurozone country would also need assistance.
“If Spain has a problem that would be a significant issue. We have not seen evidence of that to date. If they were in the same situation as Greece or Portugal, that would be significant because their size is so much bigger,” Wallick said. “But we don’t see at this point there being an issue with Spain.”
He is optimistic the eurozone will resolve its current economic problems. “Our sense is that the EU can solve these problems.” It has the capacity to resolve these issues but its ability to do so would be seriously challenged “if you add Spain and keep adding countries to that process.”
“Do I have faith that they will (resolve these problems)? Yes. But has it all worked out? No. Have they completed that process? No. The expectation is that they will, but it has not happened yet, so there is still a risk.”