Europe a “tragic story” says Carmignac’s Didier St Georges

European nations are caught in a “tragic story” from which they cannot emerge for some time, according to Didier St Georges, member of the Investment Committee at Carmignac Gestion, one of France’s most successful independent asset managers.

Speaking in London as the firm launched its new office in the UK, St Georges (pictured) said European policymakers spent most of last year, ahead of the arrival of Mario Draghi at the European Central Bank, “in denial”.

The firm, which now has more than €50bn in assets under management, was an early critic of the pre-Draghi ECB and Brussels’ policies. St Georges said Europe enjoyed a brief revival in Q2 this year but has once again run into headwinds that make for a chilling outlook.

German economic growth data announced earlier were “a positive surprise” but “not fantastic”, and probably not enough to compensate for the growing array of problems elsewhere.

“The Germany economy is doing well because it is strong on exports but its trading partners are weakening,” he noted. “The problem Europe has it that its economic growth is too low for its external debt to stabilise, the size of the adjustment is just too great.”

Furthermore, the problem is getting harder and harder to solve. The Long Term Refinancing Option (LTRO) brought in by Draghi was powerful at the start and managed to hold bond yields down for a while to avoid a “Lehman-type event”, but it is now clear that the effect has been short lived.

“Europe needs both growth and austerity and that can’t be done easily or quickly,” he added. “There are some tough negotiations ahead between Germany and the deficit countries. Germany will probably be OK, France is at risk, Spain is serious, and Ireland, Portugal and Greece are desperate.”

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