The Greek election result has simply postponed the finding of a lasting solution to the euro zone debt crisis to a later date and meetings between international leaders are not tackling the underlying issues, Richard Cookson, Global Chief Economist at Citi Private Bank told CNBC.
“Not much has changed. Umpteen different meetings from various financiers and heads of states have not come up with a solution because the solution involves some sort of federalism and that’s the sticking point,” Cookson told CNBC's “Worldwide Exchange”.
Leaders from the
Greek elections on Sunday saw the pro-bailout New Democracy party win by the slimmest of margins and talks to form a coalition are ongoing.
There had been fears that the anti-bailout leftist party Syriza would gain the majority of votes and lead to the exit of the country from the single currency union.
Cookson added the Greek election resultcould have been worse “but really it just postpones things and Greece can’t afford to do what is being asked of it even if it had the will.
Greece is in a depression. It doesn’t seem to me that there is a solution yet but we’ll see what comes at the end of the month, something like a banking union,” he added.
European leaders hold a summit at the end of the month where plans to stem the crisis will likely take center stage.
Spanish bond yields broke through the widely considered unsustainable 7 percent level on Monday and highlight that despite some relief on the back of the Greek elections investors do not believe Europe has any answers to the debt crisis.
Cookson said European equities are “phenomenally cheap” because of the debt crisis but come with the additional risk of unknowns in the development of the crisis and investors would be asking what they would be paid for those extra risks.
He added that he was doubtful that the European Central Bank would come in to rescue the crisis-hit region.
“They could come out with another LTRO(Long term Refinancing Operation) but they’re probably not thinking about that at the moment.
There are other things they want to do we think they’ll cut interest rates. There’s no good reason for them not to cut rates,” Cookson said.