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US Size Is Cushion Against Euro-Style Crisis: Strategist

Wednesday, 24 Nov 2010 | 12:36 PM ET

The United States faces similar debt troubles to Europe's, yet its large size will spare it from spiraling into a sovereign crisis, Marc Chandler, global head of currency strategy at Brown Brothers Harriman, told CNBC on Wednesday.

Euro Crisis: Solvency vs. Liquidity
Eurogroup President telling CNBC that the euro is not in trouble, with Marc Chandler, Brown Brothers Harriman, and Andrew Ross Sorkin, New York Times.

"We are in the same position, but we're much bigger," he said. "And sometimes size does matter. The size of the U.S. is a big cushioning for what's happening in Europe."

"In Europe, these countries are too small given the size of their banking sector, given the size of their debt levels," he added.

Portugal, for instance, whose economy has not expanded in a decade, has turned to private sector debt to mask its economic shortcomings, he said.

Meanwhile, turmoil in Europe has overshadowed similar problems in the United States, he said, as the debt crisis spreads to Ireland, and speculation grows that Portugal and Spaincould be next to ask for aid. Ireland unveiled a four-year austerity plan this morning to recoup $20 billion, following its acceptance of a bailout of some $114 billion earlier this week.

"The Europeans want to consider this a liquidity crisis," said Chandler. "Banks don't have enough money; governments don't have enough money."

"But underneath that, the market is judging that this is a solvency issue," he went on to say.

Debt restructuring is the "necessary solution" to these problems, but such a move is politically unattainable at the moment, he said.

"I compare it to a pincer movement," he said. "On one side you have the need for restructuring, and on the other, you have the political reality that every time they talk about it, it spirals into a bigger crisis."

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