Westpac bearish on Europe

Russell Jones of Westpac is one the our best strategic market thinkers. And for those that like an official stamp on their advice, the following is a nice take on where things are up to in the Eurozone. If you’ve been reading MB, none of this will be a surprise to you.

Strategic Insights_It’s All Greek to Me

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  1. The Europeans need to reform their currency regimes. It is completely obvious now that the deficit economies can neither grow their way nor shrink their way to fiscal balance. Because their debt dynamics are out of control, the markets can no longer support the stricken sovereigns. At the same time, the ECB is not empowered to support the sovereigns. As a result, the economies west of the Rhine and South of the Alps are trapped. They either have to leave the Euro or accept perpetual poverty. This is the mathematical situation. They need reform. The longer this is postponed, the greater will be the ultimate costs they will all bear.

  2. interesting note H&H, thanks

    key point that all the “euro debt ciris is going to end the world” people here at MB are missing is this:

    “Its bond buying programme remains “limited and temporary”

    this central bank speak for “we dont really want to but we will continue to buy bonds for as long as is required.”

    i.e no default.

    • Ah, the bailout song. You sing it so well

      And yes, I suspect you may be right, in the end.

      But the Eurozone has shown that it will not do it unless it has too in the most serious way. And that way is a rather large recession and crisis.

      So far as I know, nobody at MB has ever predicted a default. We watch the economy. And so far, we have been absolutely right.

      • H&H i hate bailouts, i think they mess with the capitalist system and have opposed ever private sector bailout ever invented. but sovereign debt is not the same. these sovereigns in europe should have the ability to print if they need to. this is the design fault in the Eu system ive mentioned many times. the ECB and anyone else who understands how sovereign finance works know this is a problem which is why they keep buying the bonds and will continue to do so.

        when i said people here at MB i meant in the comments section.

        yes, credit where its due and well called on the economy.

          • no apologies, i think some of my comments dont come across as intended anyway.

            but it is this veiw on europe that underpins long equities GB. i reckon its a big beatup that has pushed stocks lower than they should be.

  3. I agree with Mike Shedlock. This is all about giving taxpayer money to banks who lost some bets.

    This is just financial garbage, started by Wall St and inflicted on the working people and small business owners of the world.

    Let the banks fail, force them into bankruptcy and then nationalize them and appoint new top management with no payouts to the idiots who caused the problems.

  4. “that dysfunctional country”

    While Greece’s finances are dysfunctional, Greece itself is not. The birds are still singing in the trees and the cafes are still serving greek coffee. The islands are still nicer than any part of Germany.

    The media and these so called analysts are getting very carried away with flippant, abusive language towards Greece.