EU Bailout a 'Double-Edged Sword ': Strategist
The EU's 500 billion-euro crisis fund will provide 'immediate relief'; however, austerity measures attached to the bailout will harm the growth prospects of the euro zone, said Beat Lenherr, chief global strategist at LGT Capital Management.
“Below the surface, I think the not-so-good news is that they (EU policymakers) are going to reinforce fiscal stability…particularly in Spain and Portugal…that would under normal circumstances slow down the growth prospects for the whole of the euro zone,” Lenherr told CNBC on Monday.
The austerity measures are aimed at "substantially and structurally" strengthening the Euro in the long term, he explained.
Policymakers 'Behind the Curve'
While it's a good sign that EU and IMF are reacting to markets, the ECB and Euro Commission are in "reactive mode" and lagging "behind the curve", said Lenherr.
“I want to see the active intervention by the ECB, what are they going to buy and how much,” he added.
“I want to see the money. Just issuing guarantees and being reactive to the markets is good but I want to see the next steps.”
€ 500 Billion is 'Enough'
Lenherr said that the 500 billion-euro crisis fund will act as an effective financial "backstop" to halt the spread of the crisis to neighboring PIIGS nations.
However, he pointed out that the key issue here is not the amount of money, but the confidence that the package brings to markets.
“Let it go around the globe for 24 hours and see how the markets react,” he concluded.