War has been declared on systemic risk, says Carmignac’s Didier Saint-Georges

Didier Saint-Georges,member of the Investment Committee of Carmignac Gestion, says that recent policy moves by the ECB amount to a war against systemic risk

Inflationary pressures generated by the debt crisis in the developed world are still overwhelming global economic activity. Even emerging countries are experiencing slower growth while the US recovery is faltering and European countries, in particular, can no longer drag themselves out of the hellish spiral of deficit, austerity and recession.

International lenders are so concerned that they would prefer to invest their cash which is actually quite plentiful in assets with no or even negative yields rather than take the risk of lending to Europe’s peripheral countries at reasonable interest rates. For southern European countries the capital markets’ effective closure is a fatal prospect.

Therefore the European Central Bank must shore up this disastrous economy and restore sufficient confidence in the markets regarding the future of the eurozone.

The ECB president Mario Draghi understood this when he preannounced massive support for the European sovereign debt market. The plan of attack is uncertain and fraught with pitfalls but the war on systemic risk has now been declared.

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