Tuesday, May 18th, 2010
The stock markets’ March 2009 lows could be tested and even broken as sovereign debt continues to grow in Europe and stimulus measures wane, Philippe Gijsels, head of research at BNP Paribas Fortis global markets, told CNBC.com Tuesday.
“The situation on the old continent is indeed very difficult,” Gijsels said. “Like everywhere in the world a massive amount of debt has built up. In the previous banking crises the debt moved up the chain to the sovereign level and the weakest links are now being attacked.”
There are two ways to pay down these huge debts and policymakers in Europe are about to embark on the wrong path, he said.
“If you find yourself with a mountain of debt, there are eventually two ways to get rid of it,” Gijsels said. “You can save your way out off it. This means tax increases, spending reductions, a strong decline in economic growth and possibly/probably a recession. This is the course Germany is pushing for.”
This article was posted: Tuesday, May 18, 2010 at 4:07 am