Italy Next in Line for Bailout: Market Pro
Italy is next in line for a bailout following Spain’s request for aid to help recapitalize its banks, Michael Gurka, managing director of Spectrum Asset Management, told CNBC on Monday.
“We believe that Italy is going to be right behind, after Spain gets their dosage,” Gurka told "Worldwide Exchange".
Italy’s first-quarter gross domestic productshrunk by 0.8 percent on a quarterly basis and fell by 1.4 percent from a year earlier, according to final data released by national statistics office Istat.
Ten-year benchmark Italian bond yields have been climbing steadily since March, outpacing Spanish yields and narrowing the spread between Italian and Spanish debt .
The worsening outlook for the euro zone’s peripheral economies has weighed heavily on the single currency, which has lost around 12 percent against the dollar over the past year and almost 6 percent since the start of May.
Gurka thinks that a short-term bounce back on the euro/dollar could happen at the sight of positive news flow.
“The belief in the market is that the currency will survive. Right now at least, some of the premise is that you’re starting to see a lot more vernacular concerning Germany, if the [joint euro zone] Eurobonds scenario actually does come about or if there’s been a little bit of shift in premise,” Gurka said.
Gurka also pointed out that a downward movement by the euro against the dollar may be limited by U.S. policies that are keeping the greenback weak.
“It seems as though here in the U.S. this government, its policies, illiquid as they are with their transformative nature, it seems as though the soft dollar continues to come back into focus,” Gurka told CNBC.