Second in the series on the European and U.S. debt crises

by Laura Ehrenberg-Chesler on July 21, 2011

in Credit Crisis,Fiscal Policy,Foreign Markets,politics

This is my second post this week on the interview done with Sean Egan in the July 18 edition of “Barron’s”. Mr Egan is president and co-founder of the Egan-Jones rating agency. In his comments regarding the European sovereign-debt crisis, Mr. Egan believes that American investors are severely underestimating its scale. “They overestimate the amount of debt that Greece, Ireland and Portugal can realistically shoulder, given the sorry state of their economies.” And, the European bankers essentially continue to kick the can down the road, “pretending everything is fine.” One disadvantage that Europe has to contend with compared to

the U.S. during the 2008 crisis, is that the EU requires a great deal of diplomacy in order to get decisions made. Where “Hank Paulson…. could work up a bailout in three phone calls, Trichet has to make 20, and still wouldn’t have a workable plan. The euro system is a monetary arrangement without a fiscal backbone.” Whatever the resolution, Egan believes this will be a big story, with large scale instability. If he is right, and political leaders here and abroad cannot muster the political will to make hard decisions, the economies of the world are bound to suffer for several years to come.

Leave a Comment

Previous post:

Next post: