Axel Merk March 18, 2010
Deutsche Bank Chief Josef Ackermann is looking after his own house rather than the eurzone's interests in calling for a Greek bailout. If there is one thing the financial crisis has taught us, it is that simply patching up trouble spots may not be a recipe for increased structural stability. If there was a problem it is that Greece was enticed to spend too much last decade because its cost of borrowing was too low. If Deutsche Bank is concerned about the fallout of Greek debt, the bank should heed European Central Bank (ECB) President Trichet's advice and take advantage of favorable market conditions to raise more capital.
There is a bright side to the Greek drama: the markets are reining in those who are fiscally irresponsible. In our assessment, the eurozone should work on reform that works with, rather than against, the markets:
We don't expect eurzone countries to reach their deficit targets anytime soon, but the eurzone, unlike the U.S., has rules in place to encourage fiscal restraint. Policy makers in the eurozone should now work on improving the process before contemplating bailouts. Greece certainly has major challenges, but when the dust settles it will likely be seen for what it is: a struggling country comprising 2 percent of the eurozone GDP. That's not a justification for a bailout to help Deutsche Bank recover paper losses. Over time, but not overnight, Greece will be rewarded with a lower cost of borrowing should they execute on their ambitious austerity measures.
Axel Merk Merk Investments President and Chief Investment Officer Author of SustainableWealth.
Don't miss Axel Merk: FoxBusiness TV Mar 16, 6:00pm ETWith Neil Cavuto
var gaJsHost = (("https:" == document.location.protocol) ? "https://ssl." : "http://www."); document.write(unescape("%3Cscript src='" + gaJsHost + "google-analytics.com/ga.js' type='text/javascript'%3E%3C/script%3E")); try { var pageTracker = _gat._getTracker("UA-6715536-2"); pageTracker._trackPageview(); } catch(err) {} __sfga(); Read Full Article »