Last week, European leaders put forward a plan for resolving the eurozone’s sovereign debt crisis — a plan that has been thrown into turmoil by Greece’s surprise decision to hold a referendum on the bailout package. Now investment professionals are sharing their views.
In a new survey of 475 CFA Institute members based in Europe — among them, portfolio managers, research analysts, risk managers, and chief-level executives both inside and outside the eurozone — 51% of respondents said that they favor the creation of an EU Ministry of Finance with finance and tax-raising powers as the best solution to the eurozone crisis. In comparison, 33% said that they favor allowing for sovereign defaults and expelling eurozone countries with unsustainable economic deficits, and just 6% of respondents said that the best solution for the crisis would be abandoning the euro and returning to a system of national currencies.
“Whilst it is difficult to predict what may happen to the euro and European markets in the coming months, the respondents remain positive about the longer-term future,” says Nitin Mehta, CFA, managing director for Europe, Middle East and Africa at CFA Institute.
Case in point: Almost two out of three respondents believe that a breakup of the eurozone is unlikely. And over half of respondents — 57% — said that sovereigns should not be removed from the monetary union in the eurozone in the event they default on their debt.
The online survey of CFA Institute members was conducted from 10-16 October 2011 and included responses from investment professionals in 37 countries, with the majority based in the United Kingdom, Switzerland, Germany, and France.
Interestingly, the investment professionals surveyed recognize a role for the private sector in responding to the crisis. As many as 61% think that the responsibility for the response to the crisis should come from both national governments and the private sector, compared to 34% who think that this is the sole responsibility of national governments.
Although there are differences among the investment professionals surveyed on how best to solve the eurozone crisis, there is broad agreement on two issues. First, 70% of respondents said they either “agree” or “strongly agree” that a failure of the eurozone would be a failure of Europe. And second, 76% of respondents believe that Greece is the country that is most likely to leave the eurozone.
Members of CFA Institute in Europe do not seem particularly pessimistic in their economic outlook. More than half of respondents — 54% — said that they are expecting the majority of the eurozone economies to return to trend growth within three years. In addition, 38% of respondents predict a return to trend growth in four to five years.
Read the full presentation: The Future of the Eurozone: CFA Institute Member Poll Results. (PDF)
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