Euro System Won't Work Without Penalties: Lazard Exec
Worries over the European debt crisis were back in the news Monday as euro shares dropped sharply ahead of debt auctions this week.
"We don't think it (the debt crisis) will change for quite some time, so these recurring blips of fear have to do with one country or another when they have to face refinancing issues," Gary Parr, vice chairman of Lazard, told CNBC's "The Strategy Session" on Monday.
A solution is more likely to come from systemic answers that can hold together the Euro and hold together financing for those countries as well as some needed fiscal tools, Parr went on to say..
"Without the fiscal tools—the ability to penalize someone if they have sizable deficits—if you don't have that really in place with teeth, you don't have a system that works," said Parr.
"The broader perspective is that there are some real fundamental issues in Europe related to the Euro financing—how the financing will take place, which countries have deficits of various sizes—that hasn't changed for a year," Parr said.
For this reason, European institutions have more too worry about than the United States right now, said Parr.
"In the US there is more confidence today than I've seen in three or four years, going back just pre-crisis. With that confidence banks in particular are thinking about dividend policy, that's something new...it's coming on the horizon," Parr said, adding, "2011 and into 2012 is probably when you begin to see that."
"Some amount of merger activity in the U.S. banks is beginning to perk up, not the large banks we don't think, it's a lot of regulation, it's still capital issues," he said.
"Financial institutions still need to raise a lot of capital to comply with Basel, it's hundreds of billions of dollars over the next three-to-five years. That causes people to be cautious," Parr said.
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