Spain gets eurozone stage, Pioneer Investments warns
Concerns that the European monetary union may break up are resurfacing, warned today Cosimo Marasciulo, head of government bond and foreign exchange and Monica Defend, head of global asset allocation at Pioneer Investments.
According to the asset management company, the request for bailout by some Spanish regions may further strain the central government’s finances, while Greece has moved back into the spotlight for its alleged inability to pursue austerity measures and international creditors may lose patience and treat future cases more severely.
“The situation in Spain deserves some attention. EU finance ministers have approved an aid package for its banks, but the number of Spain’s autonomous regions asking for financial assistance has grown by the day and may prompt EMU’s fourth largest economy to request a full bailout if borrowing costs cannot fall from hardly sustainable levels,” Marasciulo and Defend said.
Spain is now taking the stage, both at EMU and global level.
“Reasons for concerns are not without cause, but the case for risky assets is still made by central banks’ efforts to use all tools available to stimulate the economy and ease investor fears,” they said.
Another support to the global economy and to risky asset markets may come from resilient growth outside the EMU.
Pioneer is confident that China’s policy efforts will succeed in avoiding a hard landing, whilethe US economy is unlikely to fall into recession as a result of a post-election budget tightening, the so-called fiscal cliff.
“While we are mindful about mid-summer volatility in financial markets, a replica of last year’s perfect storm looks remote this time,” Pioneer said.