Trying to assess the global economic outlook, the Delivering Alpha conversation has naturally shifted to Europe, and most importantly —the Euro.
On how different the Euro will look in two years, Blackrock’s CEO Larry Fink responds:
“The amount of money that is short in Europe.. is enormous. This is so different than in 2008-2009, because people are not buying sovereigns… Incrementalism has destabilized Europe.”
Yet, despite this grim outlook — the group ultimately expects a solution.
Fink adds, “We are going to find a solution in Europe, and Germany will have to play a substantial role. Greece is being highlighted right now – I don’t think it’s rational to spin off Greece out of the Euro. Greece’s liabilities are Euros and Swissies. They can’t just magically go back to the drachma. That’s where you have systemic risk.”
The prescription for Greece? Go slow. This is not a quick fix problem, from which Europe can easily avoid. The European Central Bank will need to invest a “huge amount” to stabilize the Eurozone, Fink concludes.
Bottom line, will Greece default?
Fink concludes: “That means every individual that has a Euro loan in Greece has to restructure. It is not that simple to allow Greece to default and move into the drachma.”