Europe Economy

Markets Moving Faster Than Euro Policy: Citi Advisor

The crisis threatening to envelop Spain and Italy, two of Europe's biggest economies, is moving faster than euro zone policy makers can keep up with, William Rhodes, senior advisor at Citigroup and author of Banker to the World, told CNBC Monday.

"Markets move so much more rapidly than EU bureaucracy understands," he said. "We are dealing with technology that moves markets in nano-seconds."

His comments came after a few days when the simmering problems in some of the world's biggest economies seemed to come to a head all at once.

The US lost its AAA credit rating from Standard & Poor's for the first time ever on Friday. Treasury Secretary Timothy Geithner told CNBC that the ratings agency had shown "terrible judgment" by downgrading the US.

Rhodes pointed out that the S&P had signaled for "quite some time" that a downgrade was on the cards.

US jobs figures on Friday gave some much-needed grounds for optimism, with better-than-expected 117,000 jobs added in July and a slight drop in the unemployment rate to 9.1 percent.

"In the longer term in the US, what's important is jobs and growth, and the ability of the new commission (that’s tasked with finding savings in the U.S. budget) to get this extra trillion in deficit reduction," said Rhodes.

The Citi adviser believes that key trade agreements with South Korea and Colombia need to be completed in order to help boost jobs in the US.

On Sunday, the European Central Bank said it would "actively implement" a controversial bond-buying program to fight the euro zone's debt crisis to try and restore confidence in the market after weeks of jitters. 

Rhodes compared ECB president Jean-Claude Trichet to Atlas, the Titan of Greek mythology who held the whole world on his shoulders.

Spain and Italy are the latest euro zone economies which look like they could be dragged into the debt crisis mire. 

"Sometimes these crises start in the sovereign, like in Greece, and then drag banks in, sometimes it's the banks that drag sovereigns into trouble," said Rhodes.

"The question in Europe is confidence in the inter-bank and counter-party side, and that's driven by sovereign debt."

He called for "strong leadership and quick action" from euro zone leaders.

Bob Parker, senior advisor at Credit Suisse, told CNBC Monday that corporate balance sheets are "exceptionally strong.”

Comparing the current crisis to the liquidity crisis which followed the dotcom bust of 2000-01, he said "If you look at corporate balance sheets relative to sovereign balance sheets, there's exactly the opposite situation to what we had eleven years ago.

"Bank balance sheets are much stronger than during the 07/08 crisis."

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